-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HsNY/nXkGzPgnNG3LNVojJFHQmBdcxIR706B2MkEBBM/3Svdpd3dF2tmUl9zRDcg NKRnllS8Gn1YU0hh2xaL7A== 0001047469-98-037993.txt : 19981026 0001047469-98-037993.hdr.sgml : 19981026 ACCESSION NUMBER: 0001047469-98-037993 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19981023 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BRC HOLDINGS INC CENTRAL INDEX KEY: 0000205219 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 751533071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-09063 FILM NUMBER: 98729493 BUSINESS ADDRESS: STREET 1: 1111 W MOCKINGBIRD LN STREET 2: STE 1400 CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146881800 MAIL ADDRESS: STREET 1: 1111W MOCKINGBIRD LANE STREET 2: SUITE 1400 CITY: DALLAS STATE: TX ZIP: 75247 FORMER COMPANY: FORMER CONFORMED NAME: BUSINESS RECORDS CORPORATION HOLDING CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CRONUS INDUSTRIES INC DATE OF NAME CHANGE: 19900813 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BRC HOLDINGS INC CENTRAL INDEX KEY: 0000205219 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 751533071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 1111 W MOCKINGBIRD LN STREET 2: STE 1400 CITY: DALLAS STATE: TX ZIP: 75247 BUSINESS PHONE: 2146881800 MAIL ADDRESS: STREET 1: 1111W MOCKINGBIRD LANE STREET 2: SUITE 1400 CITY: DALLAS STATE: TX ZIP: 75247 FORMER COMPANY: FORMER CONFORMED NAME: BUSINESS RECORDS CORPORATION HOLDING CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CRONUS INDUSTRIES INC DATE OF NAME CHANGE: 19900813 SC 14D9 1 SC 14D9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 ------------------------ BRC HOLDINGS, INC. (Name of Subject Company) ------------------------ BRC HOLDINGS, INC. (Name of Person(s) Filing Statement) ------------------------ COMMON STOCK, $.10 PAR VALUE (Title of Class of Securities) 227174-10-9 (CUSIP Number of Class of Securities) ------------------------ JERROLD L. MORRISON PRESIDENT AND CHIEF OPERATING OFFICER BRC HOLDINGS, INC. 1111 W. MOCKINGBIRD LANE, SUITE 1400 DALLAS, TEXAS 75247-5014 (214) 688-1800 (Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications on Behalf of the Person(s) Filing Statement) WITH COPIES TO: JEFFERY M. SONE, ESQ. CHARLES S. GILBERT, ESQ. ARTER & HADDEN, LLP JACKSON WALKER L.L.P. 1717 MAIN STREET, SUITE 4100 901 MAIN STREET, SUITE 6000 DALLAS TX 75201-4605 DALLAS, TEXAS 75202 (214) 761-2100 (214) 953-6000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is BRC Holdings, Inc., a Delaware corporation (the "Company"), and the address of the principal executive offices of the Company is 1111 W. Mockingbird Lane, Suite 1400, Dallas, Texas 75247-5014. The title of the class of equity securities to which this Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Statement") relates is the Company's common stock, par value $.10 per share (the "Shares"). ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to the tender offer (the "Offer") disclosed in a Tender Offer Statement on Schedule 14D-1, dated October 23, 1998 (the "Schedule 14D-1") of ACS Acquisition Corporation, a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Affiliated Computer Services, Inc., a Delaware corporation ("Parent") for 8,704,238 Shares. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of October 19, 1998 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger (as such, the "Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger"). In the Merger, each outstanding Share (other than Shares owned by (i) Parent, the Purchaser, the Company, or any direct or indirect subsidiary of Parent or the Company or (ii) stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive the per Share price paid in the Offer in cash, without interest (the "Merger Consideration"). See Item 3(b). "Identity and Background--The Merger Agreement" located at page 3 of this Statement. In connection with the execution of the Merger Agreement, Parent and Purchaser entered into a Stock Tender Agreement, dated as of October 19, 1998 (the "Stock Tender Agreement"), with Kathryn Ayres Esping, individually and as a Director of the Esping Family Foundation, Inc., and as Independent Executor of the Estate of P. E. Esping, and Paul Stoffel, individually, (collectively, the "Stock Tender Parties"). The Stock Tender Parties collectively own 2,968,350 Shares (excluding 324,000 Shares issuable under presently exercisable stock options) or approximately 17.4% of the outstanding Shares on a fully diluted basis as of September 30, 1998. Pursuant to the Stock Tender Agreement, the Stock Tender Parties have agreed, so long as Parent, the Purchaser or the Company has not terminated the Merger Agreement, to tender validly pursuant to the Offer, and not withdraw, all Shares which are owned of record by them prior to the Expiration Date (as defined herein). The obligations of the Stock Tender Parties under the Stock Tender Agreement are several and not joint. The Stock Tender Agreement is more fully described in Item 3(b). "Identity and Background--Potential or Actual Conflicts of Interest--Stock Tender Agreement," located at page 12 of this Statement. The Merger Agreement provides that effective upon purchase and payment for the Shares by the Purchaser, the Purchaser shall be entitled to designate the number of directors, rounded up to the next whole number, on the Company's Board of Directors (the "Board") that equals the product of (i) the total number of directors on the Board (giving effect to the election of any additional directors pursuant to this paragraph) and (ii) the percentage that the number of Shares owned by the Purchaser (including Shares accepted for payment) bears to the total number of Shares outstanding on a fully diluted basis, and the Company shall take all action necessary to cause the Purchaser's designees to be elected or appointed to the Board, including, without limitation, increasing the number of directors, and seeking and accepting resignations of its incumbent directors. See Item 3(b). "Identity and Background--The Merger Agreement--Board of Directors," located at page 6 of this Statement. The Schedule 14D-1 states that the principal executive offices of ACS and the Purchaser are located at 2828 North Haskell, Dallas, Texas 75204. 2 ITEM 3. IDENTITY AND BACKGROUND. (a) The name and address of the Company, which is the person filing this Statement, is set forth in Item 1 above. All information contained in this Statement or incorporated herein by reference concerning Parent, the Purchaser or their affiliates, or actions or events with respect to any of them, was provided by Parent, and the Company takes no responsibility for such information. (b) Each material contract agreement, arrangement or understanding and any actual or potential conflict of interest between the Company or its affiliates and (i) the Company, its executive officers, directors or affiliates or (ii) Parent, its executive officers, directors or affiliates is set forth herein or in the Information Statement Pursuant to Section 14(f) of the Securities Exchange Act and Rule 14f-1 thereunder dated October 23, 1998 attached hereto as Annex B and incorporated herein by reference in its entirety (the "Information Statement"). Specifically, the Company has entered into (1) Transition Compensation Agreements with each of Jerrold L. Morrison, Harvey V. Braswell, Thomas E. Kiraly and Bernard J. Owens, which are attached as Exhibits 2, 3, 4, and 5, respectively, hereto and are summarized below and incorporated herein by reference in their entirety (the "Transition Agreements") and (2) an Agreement with Paul T. Stoffel, dated as of October 18, 1998, which is attached hereto as Exhibit 6 and summarized below and incorporated herein by reference in its entirety. Contemporaneously with the execution of the Merger Agreement, two stockholders of the Company entered into the Stock Tender Agreement, which is attached hereto as Exhibit 7 and summarized below and incorporated herein by reference in its entirety. In addition, the officers and directors of the Company are the beneficiaries of certain provisions of the Company's Certificate of Incorporation and bylaws, and statutory provisions under the Delaware General Corporation Law relating to indemnification of officers and directors. THE MERGER AGREEMENT The following summarizes certain portions of the Merger Agreement, which relate to arrangements among the Company, Parent, the Purchaser and the Company's executive officers and directors. The summary of the Merger Agreement provided below is qualified in its entirety by reference to the Merger Agreement. A copy of the Merger Agreement has been filed as Exhibit 1 to this Statement and is incorporated herein by reference and should be read in its entirety for a more complete description of the terms and provisions of the Merger Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. THE OFFER. The Merger Agreement provides for the making of the Offer by the Purchaser. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition and certain other conditions that are described in Item 3(b). "Identity and Background--Certain Conditions to the Offer" located at page 10 of this Statement. The Purchaser has agreed that, without the written consent of the Company, no change in the Offer may be made which changes the form of consideration to be paid or decreases the price per Share or the amount of Shares sought in the Offer or which imposes conditions to the Offer in addition to the Minimum Condition and those conditions described in Item 3(b). "Identity and Background--Certain Conditions to the Offer" located at page 10 of this Statement. THE MERGER. The Merger Agreement provides that, following the purchase of Shares pursuant to the Offer, the approval of the Merger Agreement by the stockholders of the Company and the satisfaction or waiver of the other conditions to the Merger, the Purchaser will be merged with and into the Company. The Merger shall become effective at such time as a certificate of merger or certificate of ownership and merger is filed with the Delaware Secretary of State or at such later time as is specified in such certificate of merger (the "Effective Time"). As a result of the Merger, all of the properties, rights, privileges and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation. 3 At the Effective Time, (i) each issued and outstanding Share owned or held by Parent, the Purchaser, the Company or any direct or indirect subsidiary of Parent or the Company shall be canceled, and no payment shall be made with respect thereto; (ii) each share of common stock of the Purchaser then outstanding shall be converted into and become one share of common stock of the Surviving Corporation; and (iii) each Share outstanding immediately prior to the Effective Time shall, except as otherwise provided in (i) above and except for Shares held by any holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares ("Dissenting Shares") in accordance with Section 262 of the Delaware General Corporation Law (the "DGCL"), be converted into the right to receive $19.00 in cash or any higher price per Share that may be paid pursuant to the Offer, without interest, less any required withholding taxes. The Merger Agreement provides that the certificate of incorporation of the Company and the bylaws of the Purchaser at the Effective Time will be the certificate of incorporation of the Surviving Corporation. The Merger Agreement also provides that the directors of the Purchaser at the Effective Time will be the directors of the Surviving Corporation and the officers of the Company at the Effective Time will be the officers of the Surviving Corporation. RECOMMENDATION. The Merger Agreement states that the Board has (i) determined that the Offer and the Merger, taken together, are fair to the holders of the Shares as well as fair to and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (iii) resolved to recommend acceptance of the Offer and approval and adoption of the Merger Agreement and the Merger by the Company's stockholders. INTERIM AGREEMENTS OF PARENT, THE PURCHASER AND THE COMPANY. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, during the period from the date of the Merger Agreement to the Effective Time, the Company and its subsidiaries will each conduct its operations according to its ordinary and usual course of business consistent with past practice; that neither the Company nor any of its subsidiaries will intentionally take or willfully omit to take any actions that results in or could reasonably be expected to result in, a Company Material Adverse Effect (as defined in the Merger Agreement); that the Company will use its reasonable best efforts to preserve intact the business organization of the Company and each of its subsidiaries, to keep available the services of its and their present officers and key employees and consultants, and to maintain satisfactory relationships with customers, agents, suppliers, and other persons having business relationships with the Company or its subsidiaries. Pursuant to the Merger Agreement, without limiting the generality of the foregoing, and except as otherwise expressly provided in the Merger Agreement, neither the Company nor any of its subsidiaries will (a) issue, sell, or dispose of additional shares of capital stock of any class (including the Shares) of the Company or any of its subsidiaries, or securities convertible into or exchangeable for any such shares or securities, or any rights, warrants, or options to acquire any such shares or securities, other than Shares issued upon exercise of options disclosed pursuant to the Merger Agreement, in each case in accordance with the terms so disclosed; (b) redeem, purchase, or otherwise acquire, or propose to redeem, purchase, or otherwise acquire, any of its outstanding capital stock, or other securities of the Company or any of its subsidiaries; (c) split, combine, subdivide, or reclassify any of its capital stock or declare, set aside, make, or pay any dividend or distribution on any shares of its capital stock; (d) sell, pledge, dispose of, or encumber any of its assets, except for sales, pledges, dispositions, or encumbrances in the ordinary course of business consistent with past practices; (e) incur or modify any indebtedness or issue or sell any debt securities, or assume, guarantee, endorse, or otherwise as an accommodation become absolutely or contingently responsible for obligations of any other person, or make any loans or advances, other than in the ordinary course of business consistent with past practices; (f) adopt or amend any bonus, profit sharing, compensation, severance, termination, stock option, pension, retirement, deferred compensation, employment or other employee benefit agreements, trusts, plans, funds, or other arrangements for the benefit or welfare of any director, officer, or employee, or (except for normal increases in the ordinary course of business that 4 are consistent with past practices and that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company) increase in any manner the compensation or fringe benefits of any director, officer, or employee or pay any benefit not required by any existing plan or arrangement (including, without limitation, the granting or vesting of stock options or stock appreciation rights) or take any action or grant any benefit not expressly required under the terms of any existing agreements, trusts, plans, funds, or other such arrangements or enter into any contract, agreement, commitment, or arrangement to do any of the foregoing or make or agree to make any payments to any directors, officers, agents, contractors, or employees relating to a change or potential change in control of the Company; (g) acquire by merger, consolidation, or acquisition of stock or assets any corporation, partnership, or other business organization or division or make any investment either by purchase of stock or securities, contributions to capital (other than to wholly owned subsidiaries), property transfer, or purchase of any material amount of property or assets, in any other person; (h) adopt any amendments to their respective charters or bylaws or equivalent organizational documents, except as required by the Merger Agreement; (i) take any action other than in the ordinary course of business and consistent with past practices, to pay, discharge, settle, or satisfy any claim, liability, or obligation (absolute or contingent, accrued or unaccrued, asserted or unasserted, or otherwise); (j) change any method of accounting or accounting practice used by the Company or any of its subsidiaries, except for any change required by reason of a concurrent change in generally accepted accounting principles; (k) revalue in any respect any of its assets, including, without limitation, writing down the value of its portfolio or writing off notes or accounts receivable other than in the ordinary course of business consistent with past practices; (l) authorize any new capital expenditure; (m) make any tax election, settle or compromise any federal, state, or local tax liability or consent to the extension of time for the assessment or collection of any federal, state, or local tax; (n) settle or compromise any pending or threatened suit, action, or claim material to the Company and its subsidiaries taken as a whole or relevant to the transactions contemplated by this Agreement; (o) enter into any agreement, arrangement, or understanding to do any of the foregoing actions; or (p) voluntarily take any action or willfully omit to take any action that could make any representation or warranty of the Company in the Merger Agreement untrue or incorrect in any material respect at any time, including as of the date of the Merger Agreement and as of the time of consummation of the Offer and the Effective Time, as if made as of such time. CONFIDENTIALITY. Pursuant to the Merger Agreement, Parent and the Purchaser will each hold and will each cause its consultants and advisors to hold in confidence, unless compelled to disclose by judicial or administrative process or, in the written opinion of its legal counsel, by other requirements of law, all documents and information concerning the Company and its subsidiaries furnished to Parent or the Purchaser in connection with the transactions contemplated by the Merger Agreement (except to the extent that such information can be shown to have been (i) previously known by Parent or the Purchaser from sources other than the Company, or its directors, officers, representatives or affiliates, (ii) in the public domain through no fault of Parent or the Purchaser, or (iii) later lawfully acquired by Parent or the Purchaser from other sources who are not known by Parent or the Purchaser to be bound by a confidentiality agreement or otherwise prohibited from transmitting the information to Parent or the Purchaser by a contractual, legal or fiduciary obligation) and will not release or disclose such information to any other person, except its auditors, attorneys, financial advisors and other consultants and advisors in connection with the Merger Agreement and the transactions contemplated thereby. Parent and the Purchaser will each be deemed to have satisfied its obligation to hold such information confidential if it exercises the same care as it takes to preserve confidentiality for its own similar information. NONSOLICITATION. The Merger Agreement provides that the Company shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or any of its subsidiaries, solicit or encourage (including by way of furnishing information) the initiation of any inquiries or proposals (each an "Acquisition Proposal") regarding a Third Party Acquisition (as defined below). Provided that nothing in the Merger Agreement shall prevent the Board if it determines in good faith, after consultation with, and the receipt of advice from, outside counsel, that it is required to do so in order to discharge 5 properly its fiduciary duties, from considering, negotiating, approving and recommending to the stockholders of the Company an unsolicited bona fide written Acquisition Proposal that the Board determines in good faith (after consultation with its financial advisors and legal counsel) would result in a transaction more favorable to the Company's stockholders than the transaction contemplated by the Merger Agreement (any Acquisition Proposal meeting such criterion, being referred to as a "Superior Proposal"). Provided further that nothing in the Merger Agreement shall prohibit the Company from complying with Rules 14d-9 and 14e-2 under the Exchange Act with respect to any other tender offers. The Company must promptly, but in no event later than 24 hours, notify Parent after receipt of any Acquisition Proposal or any request for nonpublic information relating to the Company or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent has to be made orally and in writing and must indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact. If the Board receives a request for material nonpublic information by a party who makes an unsolicited bona fide Acquisition Proposal and the Board determines that such proposal, if consummated pursuant to its terms would be a Superior Proposal, then the Company may, subject to the execution of a confidentiality agreement substantially similar to that then in effect between the Company and Parent, provide such party with access to information regarding the Company. The Merger Agreement requires that the Company immediately cease and cause to be terminated any existing discussions or negotiations with any parties (other than Parent and the Purchaser) conducted before the date of the Merger Agreement with respect to any Acquisition Proposal, and the Company agreed not to release any third party from any confidentiality or standstill agreement to which the Company is a party. The Company also agreed to ensure that the officers, directors and employees of the Company and its subsidiaries and any investment banker or other advisor or representative retained by the Company are aware of these restrictions; and be responsible for any breach of this restriction by such bankers, advisors and representatives. ACCESS TO INFORMATION. Between the date hereof and the Effective Time, the Company will give Parent and the Purchaser and their authorized representatives reasonable access to all employees, plants, offices, warehouses and other facilities and to all books and records of the Company and its subsidiaries, will permit Parent and the Purchaser to make such inspections as Parent and the Purchaser may reasonably require and will cause the Company's officers and those of its subsidiaries to furnish Parent and the Purchaser with such financial and operating data and other information with respect to the business and properties of the Company and any of its subsidiaries as Parent or the Purchaser may from time to time reasonably request. BOARD OF DIRECTORS. The Merger Agreement provides that effective upon purchase and payment for any tendered Shares by the Purchaser, the Purchaser shall be entitled to designate the number of directors, rounded up to the next whole number, on the Board that equals the product of (i) the total number of directors on the Board (giving effect to the election of any additional directors pursuant to this paragraph) and (ii) the percentage that the number of Shares owned by the Purchaser (including Shares accepted for payment) bears to the total number of Shares outstanding on a fully diluted basis, and the Company shall take all action necessary to cause the Purchaser's designees to be elected or appointed to the Board, including, without limitation, increasing the number of directors, and seeking and accepting resignations of its incumbent directors. Notwithstanding the foregoing, the Company has the right to have at least two of the current members of the Board remain members of the Board until the Effective Time. STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company shall cause a meeting of its stockholders (the "Company Stockholder Meeting") to be duly called and held for the purposes of voting on the approval and adoption of the Merger Agreement and the Merger. The Merger Agreement provides that the Company and Parent will cooperate and use all reasonable efforts to prepare, and the Company and Parent will file with the SEC, as soon as reasonably practical after completion of the Offer, a proxy statement or information statement relating to the Company Stockholder Meeting, if required (the "Proxy 6 Statement"). The Company has agreed, subject to the fiduciary duties of its Board of Directors, to use all reasonable efforts to obtain the necessary approvals by its stockholders of the Merger Agreement and the transactions contemplated thereby. Parent has agreed to vote and to cause its affiliates (including, without limitation, the Purchaser) to vote all Shares owned by them in favor of adoption of the Merger Agreement. INDEMNIFICATION AND INSURANCE. Parent, the Purchaser and the Company have each agreed that all rights to indemnification or exculpation now existing in favor of the directors, officers, employees and agents of the Company and its subsidiaries as provided in their respective charters or bylaws or other contracts scheduled in the Merger Agreement shall, to the extent such rights are in accordance with applicable law, survive the Merger and stay in effect in accordance with their respective terms. The Merger Agreement also provides that the Surviving Corporation shall, until the third anniversary of the Effective Time, cause to be maintained in effect policies of directors' and officers' liability insurance for director and officers of the Company on terms no less favorable than the existing coverage maintained by the Company as of the date of the Merger Agreement, in each case including for claims arising from facts or events that occurred at or before the consummation of the Offer; provided, however, that the Surviving Corporation shall not be required in order to maintain or procure such coverage to pay an annual premium in excess of 200% of the current annual premium paid by the Company for its existing coverage (the "Cap"); and provided, further, that if equivalent coverage cannot be obtained, or can be obtained only by paying an annual premium in excess of the Cap, the Surviving Corporation shall only be required to obtain as much coverage as can be obtained by paying an annual premium equal to the Cap. BEST EFFORTS. The Merger Agreement provides that the Company, the Purchaser and Parent will each use all reasonable best efforts to consummate the transactions contemplated by the Merger Agreement. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties of the parties thereto including, without limitation, representations by the Company as to corporate power and authority to execute, deliver and consummate the Merger Agreement, undisclosed liabilities, certain changes or events concerning its businesses, compliance with applicable law, employee benefit plans, litigation, environmental liabilities, intellectual property rights and material contracts. CONDITIONS TO THE MERGER. The obligations of each of Parent, the Purchaser and the Company to effect the Merger are subject to the satisfaction of certain conditions, including: (a) the Merger Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by the requisite vote or consent in accordance with the charter and bylaws of the Company and with applicable law; (b) no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any U.S. court or U.S. governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Merger or which imposes any material limitation on the ability of Parent or the Purchaser to exercise rights of ownership of the Shares provided that the parties will use their respective reasonable best efforts to have any such injunction, decree or order lifted; (c) any waiting period applicable to the Merger under the HSR Act shall have terminated or expired and all required filings, consents, approvals, permits and authorizations with or for governmental authorities have been made or obtained (without what the Purchaser deems to be a materially burdensome condition); and (d) the Purchaser shall have purchased tendered Shares pursuant to the Offer. TERMINATION. The Merger Agreement may be terminated: (a) by mutual written consent of Parent, the Purchaser and the Company; (b) by Parent and the Purchaser or the Company if any court of competent jurisdiction in the United States or other United States governmental body shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (c) by Parent and the Purchaser if due to an occurrence or circumstance which would result in a failure to satisfy any of the conditions set forth in Item 3(b). "Identity and Background--Certain Conditions to the Offer," the Purchaser shall have (i) failed to commence the Offer within five days following the initial 7 public announcement of the Offer, (ii) terminated the Offer or (iii) failed to pay for tendered Shares pursuant to the Offer; (d) by the Company if (i) there shall not have been a breach of any material representation, warranty, covenant or agreement on the part of the Company and the Purchaser shall have (A) failed to commence the Offer within five days following the initial public announcement of the Offer, (B) terminated the Offer or (C) by January 31, 1999 (provided, however, that any termination pursuant to this clause C must be made by irrevocable written notice delivered to the Purchaser and Parent by noon, Dallas time, on January 31, 1999), or (ii) prior to the purchase of tendered Shares pursuant to the Offer, a person or group shall have made a bona fide offer that the Board by a majority vote determines in its good faith judgment and in the exercise of its fiduciary duties, after consultation with its financial advisors and based as to legal matters on the written opinion of legal counsel, is obligated by its fiduciary duties under applicable law to terminate the Merger Agreement, provided that such termination under this clause (ii) shall not be effective until payment of the Termination Fee (as defined below); (e) by Parent and the Purchaser prior to the purchase of tendered Shares pursuant to the Offer if (i) there shall have been a breach (not cured or curable within certain time limits) of any representation or warranty on the part of the Company having a Company Material Adverse Effect or materially adversely affecting (or materially delaying) the consummation of the Offer, (ii) there shall have been a breach (not cured or curable within certain time limits) of any covenant or agreement on the part of the Company resulting in a Company Material Adverse Effect or materially adversely affecting (or materially delaying) the consummation of the Offer, (iii) the Company shall engage in negotiations with any entity or group (other than Parent or the Purchaser) that has proposed a Third Party Acquisition (with certain exceptions), (iv) the Company enters into an agreement, letter of intent or arrangement with respect to a Third Party Acquisition, (v) the Board shall have withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger or shall have recommended another offer, or shall have adopted any resolution to effect any of the foregoing or (vi) the Minimum Condition shall not have been satisfied by the expiration date of the Offer and (A) on such date an entity or group (other than Parent or the Purchaser) shall have made and not withdrawn a proposal with respect to a Third Party Acquisition or (B) any person or group (including the Company or any of its affiliates other than Parent or the Purchaser) has become the beneficial owner of 19.9% (except in bona fide arbitrage transactions) or more of the Shares; or (f) by the Company if (i) there shall have been a breach (not cured or curable with certain time limits) of any representation or warranty on the part of Parent or the Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or (ii) there shall have been a material breach (not cured or curable with certain time limits) of any covenant or agreement on the part of Parent or the Purchaser and which materially adversely affects (or materially delays) the consummation of the Offer. TERMINATION FEE. Pursuant to the Merger Agreement, in the event Parent and the Purchaser terminate the Merger Agreement pursuant to clause (e)(i) through (v) of the preceding paragraph or the Company terminates the Merger Agreement pursuant to clause (d)(ii) or (d)(i)(C) of the preceding paragraph, then the Company shall pay to Parent, the Purchaser and their affiliates all out-of-pocket fees and expenses actually incurred in connection with the Offer and Merger and the proposed consummation of all the transactions contemplated by the Merger Agreement not in excess of $3,000,000. If, (i) Parent and the Purchaser terminate the Merger Agreement pursuant to clause (e)(i) through (v) of the preceding paragraph or if the Company terminates the Merger Agreement pursuant to (d)(i)(C) of the preceding paragraph and, within four months thereafter the Company enters into an agreement, letter of intent or arrangement with respect to a Third Party Acquisition, or a Third Party Acquisition occurs (or within nine months after such termination if the Third Party Acquisition that occurs or with respect to which an agreement, letter of intent or binding arrangement has been entered into is or is reasonably expected to be a transaction more favorable to the Company's stockholders than the transactions contemplated by the Merger Agreement); or (ii) the Company terminates the Merger Agreement pursuant to clause (d)(ii) of the preceding paragraph, then the Company shall pay to Parent and the Purchaser, within one business day 8 following the execution and delivery of such agreement or letter of intent or entering into such arrangement or such occurrence, as the case may be, or simultaneously with such termination pursuant to clause (d)(ii) of the preceding paragraph, a fee, in cash, of $10,000,000 plus all out-of-pocket fees and expenses incurred by Parent and the Purchaser in connection with the Offer and Merger and the proposed consummation of all the transactions contemplated by the Merger Agreement, not in excess of $3,000,000. "Third Party Acquisition" means the occurrence of any of the following events (i) the acquisition of the Company by merger or otherwise by any person or entity other than Parent, the Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by Third Party of more than 19.9% of the total assets of the Company and its subsidiaries, taken as a whole; (iii) the acquisition by Third Party of 19.9% or more of the outstanding Shares that results in a change of control of the Company; (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (v) the acquisition by the Company or any of its subsidiaries of more than 19.9% of the outstanding Shares. Pursuant to the Merger Agreement, in the event of the termination and abandonment of the Merger Agreement, the Merger Agreement will become void and have no effect, without any liability on the part of any party or its directors, officers or stockholders, other than certain provisions of the Merger Agreement relating to the termination fee, expenses of the parties and confidentiality of information, provided, that any party will not be relieved from liability for any breach of the Merger Agreement. COSTS AND EXPENSES. Except as discussed above, the Merger Agreement provides that all costs and expenses incurred in connection with the transactions contemplated by the Merger Agreement shall be paid by the party incurring such costs and expenses. APPRAISAL RIGHTS. Holders of Shares do not have dissenters' rights as a result of the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the statutory procedures were complied with, such rights could lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price or the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses the right to appraisal, as provided in the DGCL, the Shares of such stockholder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. GOING PRIVATE TRANSACTIONS. The Merger will have to comply with any applicable Federal law operative at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Company does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority stockholders be filed with the Commission and disclosed to minority stockholders prior to consummation of the Merger. DIVIDENDS AND DISTRIBUTIONS. If on or after the date of the Merger Agreement, the Company should (i) split, combine or otherwise change the Shares or its capitalization, (ii) issue or sell any additional 9 securities of the Company or otherwise cause an increase in the number of outstanding securities of the Company (except for Shares issuable upon the exercise of employee stock options outstanding on the date of the Merger Agreement) or (iii) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares, then, without prejudice to the Purchaser's rights described in Item 3(b). "Identity and Background--Certain Conditions of the Offer," the Purchaser in its sole discretion, subject to the terms of the Merger Agreement, may make such adjustments as it deems appropriate in the purchase price and other terms of the Offer. If, on or after the date of the Merger Agreement, the Company should declare or pay any dividend on the Shares or make any distribution (including, without limitation, cash dividends, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to stockholders of record on a date prior to the transfer to the name of the Purchaser or its nominee or transferee on the Company's stock transfer records of the tendered Shares purchased pursuant to the Offer, then, without prejudice to the Purchaser's rights described in Item 3(b). "Identity and Background--Certain Conditions of the Offer," any such dividend, distribution or right to be received by the tendering stockholders will be received and held by the tendering stockholder at the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the two preceding paragraphs and nothing herein shall constitute a waiver by the Purchaser or Parent of any of their rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provisions of the Offer, the Purchaser will not be required to accept for payment or (subject to any applicable rules and regulations of the SEC, including Rule 14e-l(c) relating to the obligation of the Purchaser to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer) to pay for tendered Shares, or may terminate or amend the Offer as provided in the Agreement, or may postpone the acceptance for payment of, or payment for, Shares (whether or not any other Shares have been accepted for payment or paid for pursuant to the Offer) if prior to the expiration of the Offer (i) the Minimum Condition has not been satisfied; (ii) the waiting period under the HSR Act has not expired or been terminated with respect to purchase of the Shares; or (iii) if at any time on or after the date of the Merger Agreement, and at any time before the time of acceptance for payment of any such Shares, any of the following occurs: (a) any of the representations or warranties of the Company contained in the Merger Agreement is not true and correct at and as of any date prior to the expiration date of the Offer as if made at and as of such time, except for (i) failures (other than with regard to the Company's investment MatriDigm) to be true and correct as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect; or (ii) failures to comply as are capable of being and are cured prior to the earlier of (A) 10 days after written notice from the Purchaser to the Company of such failure or (B) two business days prior to the expiration date of the Offer; (b) the Company has failed to comply with any of its obligations under the Merger Agreement, except for (i) failures to so comply as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect; and (ii) failures to comply as are capable of being and 10 are cured prior to the earlier of (A) 10 days after written notice from the Purchaser to the Company of such failure or (B) two business days prior to the expiration date of the Offer; (c) the Board of Directors of the Company has withdrawn or modified in any respect adverse to Parent or the Purchaser its recommendation of the Offer or taken any position inconsistent with such, recommendation; (d) the Merger Agreement has been terminated in accordance with its terms; (e) the Company has reached an agreement with Parent or the Purchaser that the Offer or the Merger be terminated or amended; (f) any state, federal, or foreign government or governmental authority has taken any action, or proposed, sought, promulgated, or enacted, or any state, federal, or foreign government or governmental authority or court has entered, enforced, or deemed applicable to the Offer or the Merger, any statute, rule, regulation, judgment, order, or injunction that is reasonably likely to (i) make the acceptance for payment of, the payment for, or the purchase of, some or all of the Shares illegal or otherwise restrict, materially delay, prohibit consummation of, or make materially more costly, the Offer or the Merger, (ii) result in a material delay in or restrict the ability of the Purchaser, or render the Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares in the Offer or the Merger, (iii) require the divestiture by Parent, the Purchaser, or the Company or any of their respective subsidiaries or affiliates of all or any material portion of the business, assets, or property of any of them or any Shares, or impose any material limitation on the ability of any of them to conduct their business and own such assets, properties, and Shares, (iv) impose material limitations on the ability of Parent or the Purchaser to acquire or hold or to exercise effectively all rights of ownership of the Shares, including the right to vote any Shares acquired by either of them on all matters properly presented to the stockholders of the Company or (v) impose any limitations on the ability of Parent, the Purchaser, or any of their respective subsidiaries or affiliates effectively to control in any material respect the business or operations of the Company, Parent, the Purchaser, or any of their respective subsidiaries or affiliates; (g) any change (or any condition, event or development involving a prospective change) has occurred or been threatened in the business, properties, assets, liabilities, capitalization, stockholders' equity, financial condition, operations, licenses or franchises results of operations, or prospects of the Company or any of its subsidiaries, that is reasonably expected to result in a Company Material Adverse Effect; (h) there has occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market or quotations for shares traded thereon as reported by the Nasdaq or otherwise, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States other than as a participant in police actions sponsored by international organizations, (iv) any limitation (whether or not mandatory) by any governmental authority on the extension of credit by banks or other financial institutions, (v) after the date of the Merger Agreement, an aggregate decline of at least 25% in the Dow Jones Industrial Average or Standard & Poor's 500 Index or a decline in either such index of 12 1/2% in any 24-hour period, or (vi) in the case of any of the occurrences referred to in clauses (i) through (iv) existing at the time of the commencement of the Offer, in the reasonable judgment of the Purchaser, a material acceleration or worsening thereof; (i) any person or group other than Parent or the Purchaser and their affiliates has entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or 11 exchange offer for any Shares or a merger, consolidation, or other business combination or acquisition with or involving the Company or any of its subsidiaries; or (j) any material approval, permit, authorization, consent, or waiting period of any domestic or foreign, governmental, administrative, or regulatory entity (federal, state, local, provincial or otherwise) has not been obtained or satisfied on terms satisfactory to the Purchaser in its sole discretion; that, in the good faith judgment of the Purchaser, makes it inadvisable to proceed with the Offer or with such acceptance for payment of, or payment for, the tendered Shares or to proceed with the Merger. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances giving rise to any such condition or may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion (subject to the terms of the Merger Agreement). The failure by the Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts or circumstances, and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. POTENTIAL OR ACTUAL CONFLICTS OF INTEREST TRANSITION COMPENSATION AGREEMENTS. Pursuant to Transition Compensation Agreements, dated October 9, 1998, between the Company and Harvey V. Braswell, Jerrold L. Morrison and Bernard J. Owens, respectively, the Company agreed with each of these executives to pay transitional compensation upon a termination (other than a voluntary termination) of such executive within 18 months of a change in control (as defined, which would include the consummation of the Offer) equal to such executive's average salary and cash bonuses received during the twelve months preceding the change in control. Such agreements also require the Company to maintain the level of indemnification provided prior to the change in control to such executives under the Company's Certificate of Incorporation, bylaws, and any agreement with such executives and under applicable law. Pursuant to a Transition Compensation Agreement, dated October 9, 1998, between Thomas E. Kiraly and the Company, the Company agreed to pay Mr. Kiraly a retention bonus of $150,000 in the event Mr. Kiraly continues to be employed by the Company 6 months following a change in control (as defined, which would include the consummation of the Offer) or in the event his employment is involuntarily terminated during that period. In addition, in the event Mr. Kiraly's employment is terminated (other than a voluntary termination) prior to 18 months following a change in control, Mr. Kiraly is entitled to receive $150,000 in severance. Such agreement also requires the Company to maintain the level of indemnification provided prior to the change in control to such executive under the Company's Certificate of Incorporation, bylaws, and any agreement with such executive and under applicable law. STOCK TENDER AGREEMENT. The following is a summary of certain provisions of the Stock Tender Agreement (the "Stock Tender Agreement"), dated as of October 19, 1998 among Purchaser and Parent on one hand and each of Kathryn Ayres Esping , individually and as Independent Executor of the Estate of P.E. Esping and as Director of the Esping Family Foundation, and Paul T. Stoffel, individually, on the other (Ms. Esping and Mr. Stoffel are referred to collectively as the "Stock Tender Parties") which is filed as Exhibit 7 hereto and is incorporated herein by reference. Such summary is qualified in its entirety by reference to the Stock Tender Agreement. Pursuant to the Stock Tender Agreement, so long as Parent and Purchaser or the Company has not terminated the Merger Agreement, the Stock Tender Parties have agreed to validly tender (and not thereafter withdraw) the Shares owned by them pursuant to and in accordance with the terms of the Offer. The Stock Tender Parties collectively own a total of 2,968,350 Shares (excluding 324,000 Shares issuable under presently exercisable stock options), representing approximately 17.4% of the outstanding shares of Common Stock on a fully diluted basis as of September 30, 1998. 12 In connection with the Stock Tender Agreement, the Stock Tender Parties have made certain customary representations, warranties and covenants, including with respect to (i) ownership of the Shares, (ii) the Stock Tender Parties' authority to enter into and perform their respective obligations under the Stock Tender Agreement, (iii) the ability of the Stock Tender Parties to enter into the Stock Tender Agreement without violating other agreements to which they are a party, (iv) the absence of liens and encumbrances on and in respect of the Stock Tender Parties' Shares and (v) restrictions on the transfer of the Stock Tender Parties' Shares. The obligations of the Stock Tender Parties under the Stock Tender Agreements are several and not joint. STOCK OPTIONS. The vesting provisions of each stock option granted to the Company's directors and executive officers provides for acceleration upon a change in control of the Company. The consummation of the Offer will, for the purposes of each of these stock options, constitute a change in control. The following schedule sets forth the number of shares of the Company subject to issuance under each outstanding option granted to the directors and executive officers of the Company:
DIRECTORS AND/OR EXECUTIVE OFFICERS OUTSTANDING OPTIONS - ------------------------------------------------------------------------- ------------------- L. D. Brinkman........................................................... 60,000 Robert E. Masterson...................................................... 60,000 David H. Monnich......................................................... 60,000 Paul T. Stoffel.......................................................... 60,000 Jerrold L. Morrison...................................................... 390,000 Harvey Braswell.......................................................... 150,000 William J. Fosick........................................................ 66,000 Thomas E. Kiraly......................................................... 210,000 Bernard J. Owens......................................................... 214,000
STOFFEL AGREEMENT. Pursuant to an Agreement (the "Stoffel Agreement") dated October 18, 1998, the Company agreed to pay Paul T. Stoffel, the Chairman of the Board of the Company, an amount equal to $1,300,000 within two business days of the consummation of any transaction occurring prior to December 31, 2000 pursuant to which (i) any person or entity unaffiliated with the Company acquires at least a majority of the outstanding shares of Common Stock; (ii) a merger, consolidation or other business combination of the Company with any person or entity unaffiliated with the Company as of October 18, 1998 occurs or (iii) any person or entity unaffiliated with the Company as of October 18, 1998 acquires not less than a majority of the assets of the Company. The Board authorized the execution and delivery of this agreement with Mr. Stoffel by a unanimous vote of the members of the Board, other than Mr. Stoffel, during a portion of a meeting of the Board on October 18, 1998 at which Mr. Stoffel was not present. In connection with its agreement with Mr. Stoffel, the Company has also agreed to indemnify Mr. Stoffel against certain expenses and liabilities arising in connection with such agreement, including liabilities arising under the Federal securities laws. ITEM 4. THE SOLICITATION AND OR RECOMMENDATION. (a) NATURE OF THE RECOMMENDATION. At various times over the past few years, senior executives of Parent and senior executives of the Company have had discussions regarding Parent's interest in exploring a possible business combination with the Company. In addition, from time to time in the past, representatives of the Company, including Paul Stoffel and the late P. E. Esping, the former Chairman and Chief Executive Officer of the Company, contacted or were contacted by third parties and engaged in general, but limited, discussions regarding the possibility of a material business transaction involving the Company or a substantial portion of its assets. In some of these cases the Company entered into customary confidentiality and nondisclosure agreements with these third parties and provided some nonpublic information regarding the Company, its assets, 13 financial condition and prospects. None of these discussions led to a proposal regarding the price, terms and structure of a transaction including the Shares. During the period of July and August 1996, Parent and the Company discussed the possibility of a business combination. These discussions were terminated in September 1996, prior to any discussions regarding price or structure. No further discussions occurred between the parties until May 1998 when Paul Stoffel, Chairman of the Board of the Company, contacted Jeffrey A. Rich, President and Chief Operating Officer of Parent regarding a possible meeting between the parties. Subsequently, Messrs. Stoffel and Rich met at Parent's offices where Messrs. Rich and Stoffel discussed the Company's business and the possibility of entering into a business combination. At the conclusion of the meeting, Mr. Stoffel suggested that Mr. Rich meet with Perry E. Esping, then Chairman and Chief Executive Officer of the Company. In late May 1998, Messrs. Esping, Stoffel and Rich met at Parent's offices. During the meeting, Mr. Esping discussed the Company's business and operations. Although no specific terms of a business combination were discussed during this meeting, it was agreed that Parent and the Company would enter into a Non-Disclosure Agreement and that the Company would provide Parent with various financial information regarding the Company. On June 15, 1998, Parent and the Company executed a Non-Disclosure Agreement. On June 17, 1998, Mr. Stoffel, Thomas E. Kiraly, Chief Financial Officer of the Company, and several representatives of Parent met at Parent's offices to review and discuss the Company's business and financial information. During the period of July and August 1996, Parent and the Company discussed the possibility of a business combination. These discussions were terminated in September 1996 prior to any discussion regarding price or structure. Over the next few weeks, Messrs. Rich and Stoffel had various telephone discussions regarding a possible business combination between Parent and the Company. During these conversations. Messrs. Rich and Stoffel generally discussed the continuing financial performance of the Company, management of the Company and various potential structures for a transaction. On July 6, 1998, representatives of Parent met with representatives of the Company, including several of the Company's operating managers to initiate due diligence. On July 9, 1998, Messrs. Rich and Stoffel held a meeting at Parent's offices at which Mr. Rich advised Mr. Stoffel that, based upon parent's initial due diligence review, Parent was not interested pursuing a transaction with the Company at that particular point. Thereafter, discussions between the parties ceased. On September 21, 1998, Mr. Stoffel, then Chairmen of the Company, called Mr. Rich to arrange a meeting. On September 24, 1998, Messrs. Stoffel, and Rich and John H. Rexford, Senior Vice President of Parent met at Parent's offices. At the meeting, Mr. Stoffel suggested to Messrs. Rich and Rexford that Parent should reevaluate a potential acquisition of the Company. Mr. Stoffel briefly updated Messrs. Rich and Rexford on the Company's business and affairs, and at that meeting, Mr. Rich indicated that he would reevaluate the potential for a transaction. On October 1, 1998, Messrs. Rich and Rexford contacted Mr. Stoffel and proposed a cash purchase of $16.00 per share. Mr. Stoffel immediately rejected this proposal and indicated that the Company would not be interested in pursuing a transaction at that price. On October 6, 1998, at the request of the Parent, Mr. Kiraly and several representatives of Parent met at Parent's offices to review and discuss the financial results and business prospects of the Company. Mr. Kiraly gave Parent's representatives an update on the financial performance of the Company, which included a detailed discussion of the operating results of each of the Company's divisions. 14 On the afternoon of October 7, 1998, Mr. Rich asked to meet with Mr. Stoffel. At a meeting that evening, Mr. Rich proposed an offer of $18.00 per share, and later following negotiation, that offer was increased to $19.00 per share. Mr. Stoffel then agreed to submit the proposed $19.00 per Share proposal to the Board. The next morning, following informal discussions with the Board, Mr. Stoffel called Mr. Rexford and indicated that the Board would support a cash purchase price of $19.00 per share subject to the negotiation of a definitive merger agreement. On October 9, 1998, Parent's counsel distributed a draft of the Merger Agreement to the Company's counsel. On October 10 and 11, 1998, senior management to the Company met with counsel to the Company and with Donaldson, Lufkin & Jenrette Securities Corporation ("Donaldson, Lufkin & Jenrette") and reviewed the principal provisions of the Merger Agreement. On October 12, 1998, the Board met regarding the draft Merger Agreement at a meeting attended by counsel and senior management of the Company and by a representative of Donaldson, Lufkin & Jenrette. At that meeting, counsel and senior management of the Company reviewed the material provisions of the Merger Agreement and answered questions of members of the Board with regard thereto. Thereafter, the Board discussed a variety of issues relating to the structure of the transaction and material features of the Merger Agreement, including conditions of the Offer, provisions relating to the ability of the Company to terminate the Merger Agreement in the event that a third party should make a superior acquisition proposal, matters relating to termination fees and reimbursement of expenses, matters relating to the timing of the proposed transaction, the nature of the representations and warranties that the Company would be obligated to make and covenants concerning the Company's conduct of its business. Following this discussion, the Board gave instructions to its senior management and counsel regarding the continuation of negotiations with the Parent and the Purchaser. On October 12-14, 1998, meetings among the representatives of the Company and Parent were held during which negotiations on the Merger Agreement were conducted and additional legal and financial due diligence regarding the Company was conducted by Parent. Negotiations with respect to the Merger Agreement addressed, among other things, the number of Shares to be purchased in the Offer, circumstances under which a termination fee would be payable, the amount of the termination fee, provisions imposing restrictions on the Company's ability to enter into a competing transaction, representations and warranties and conditions of the Offer. After these negotiations, Parent's counsel circulated a revised draft of the Merger Agreement on the evening of October 14, 1998, and on October 15, 1998, the negotiation of the Merger Agreement continued. On October 15, 1998, Parent's board of directors held a special meeting to discuss the proposed transaction. At the meeting, Parent's representatives reviewed the status of the proposed transaction, the results of Parent's due diligence review and the proposed terms of the Merger Agreement. At the conclusion of the meeting, Parent's board of directors unanimously approved the Offer, the Merger and the Merger Agreement and gave authority to Parent's representatives to finalize negotiations of the Merger Agreement. On October 15, 1998, the Board held a special meeting and discussed the status of the negotiations, the proposed terms of the Offer, the Merger and the Merger Agreement and received a report from counsel and senior management of the Company regarding the resolution of the issues previously identified to the Board and matters as to which the Board had given instructions to counsel and senior management. In addition, the Board authorized the retention of Donaldson, Lufkin & Jenrette to render an opinion that the consideration to be received by the holders of the Shares in the Offer and the Merger would be fair to such holders from a financial point of view, and Donaldson, Lufkin & Jenrette was so engaged on October 16, 1998. Following those discussions, the Board then directed its representatives to finalize negotiations relating to the Offer, the Merger and the Merger Agreement. 15 On October 16, 1998, the parties concluded their negotiations regarding the Merger Agreement, and over the weekend of October 17-18, 1998, finalized the Merger Agreement and the Stock Tender Agreement. On October 18, 1998, the Board held a special meeting and discussed the terms of the Offer, the Merger and the Merger Agreement. At this meeting, Donaldson, Lufkin & Jenrette delivered to the Board its written opinion dated October 18, 1998 to the effect that, based upon and subject to the assumptions and limitations set forth therein, the consideration to be received by the holders of the Shares in the Offer and the Merger was fair to such holders from a financial point of view. The Board then unanimously approved the Offer, the Merger and the Merger Agreement (subject to modifications by the appropriate officers of the Company), and determined that the terms of the Offer, the Merger and the Merger Agreement are fair to, and in the best interests of the stockholders of the Company. In addition, determined to recommend that stockholders of the Company to accept the proposed Offer and tender their Shares pursuant to the Offer. On October 19, 1998, Parent, the Purchaser, and the Company entered into the Merger Agreement, and Parent, the Purchaser and the Stock Tender Parties entered into the Stock Tender Parties entered into the Stock Tender Agreement. Separate press releases announcing the transaction were issued by Parent and the Company before the opening of the U.S. stock markets on the morning of October 19, 1998. On October 22, 1998, Parent and the Purchaser commenced the Offer. RECOMMENDATION OF THE BOARD. (a) The Board recommends that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and, if required by applicable law, approve and adopt the Merger Agreement. In reaching its decision to recommend acceptance of the Offer, the Board determined that the Offer Price and the Merger Consideration are fair to the Company's stockholders and that the Offer and the Merger are in the best interests of the Company and its stockholders and are fair to the stockholders of the Company. (b) REASONS FOR THE TRANSACTION. In reaching its conclusions described above, the Board asked for and received information, made certain judgments and considered a number of factors, including, without limitation, the following: (i) In reviewing the Offer and the Merger, the Board considered presentations from, and reviewed the terms and conditions of the Offer and the Merger with, senior executive officers of the Company, representatives of its legal counsel and representatives of its financial advisor, Donaldson, Lufkin and Jenrette; (ii) In reviewing the Offer and the Merger, the Board also considered, among other things, information with respect to the financial condition, results of operations and business of the Company, on both a historical and prospective basis, and current industry, economic and market conditions. The Board also reviewed the historical market prices, price to earnings multiples and recent trading patterns of the Common Stock and considered the market prices and financial data related to other companies engaged in businesses similar to some or all of the businesses of the Company and the prices and premiums paid, and other terms, in recent acquisition transactions; (iii) In connection with its deliberations, the Board considered the results of efforts by the Company's management and members of the Board to solicit other expressions of interest or proposals from third parties with respect to a transaction with the Company; (iv) The Board engaged Donaldson, Lufkin & Jenrette to render a fairness opinion in connection with the approval of the Offer and the Merger. Donaldson, Lufkin & Jenrette reviewed various financial and other information and delivered its written opinion to the Board to the effect that, based upon and subject to the assumptions and limitations set forth therein, the consideration to be received by the holders of Shares is fair to such holders from a financial point of view. A copy of the opinion of Donaldson, Lufkin & Jenrette is filed as Annex A hereto and is incorporated herein by reference; 16 (v) In analyzing the consideration to be received by the Company's stockholders as a result of the Offer and the Merger, the Board noted that $19.00 per share represents a 16.9% premium over the $16.25 per share closing price on The Nasdaq National Market on October 16, 1998, the last full trading day prior to public announcement of the execution of the Merger Agreement, and an 18.8% premium to the average closing price on The Nasdaq National Market for the 20 trading days preceding the public announcement of the execution of the Merger Agreement; in evaluating these premiums, the Board noted that the Company had large cash and investment balances for which premiums are not normally obtained; and (vi) In reviewing the Offer and the Merger, the Board noted that the Merger Agreement is structured to accommodate certain unsolicited third-party proposals to acquire the Company and specifically permits the Company to provide information to and negotiate or discuss such proposals if the Board determines, after consultation with and the advice of the Company's financial advisor and legal counsel, that to provide such information or to engage in such negotiations or discussions are consistent with the fiduciary duties of the Board under applicable law; and if a proposal is determined to be superior to the Offer, the Board would be permitted to recommend its approval to the stockholders of the Company, (although the Company's ability to accept competing proposals is subject in certain cases to the obligation to pay Parent a termination fee of $10,000,000 plus all out-of-pocket fees and expenses incurred by the Purchaser and Parent in connection with the Offer and the Merger and the proposed consummation of the transactions contemplated in the Merger Agreement, not in excess of $3,000,000). Based upon the foregoing and other factors, the Board determined that the Offer and the Merger were in the best interests of the Company and its stockholders, and approved, by unanimous vote, the Offer, the Merger and the Merger Agreement, and unanimously voted to recommend that stockholders of the Company accept the Offer, tender their shares of Common Stock pursuant to the Offer and, if required by applicable law, approve and adopt the Merger Agreement. The foregoing discussion of the information and factors considered by the Company's Board of Directors is not intended to be exhaustive but is intended to include the material factors considered by the directors. In the view of the wide variety of factors considered by the Company's Board of Directors, the directors did not find it practical to, and did not, quantify or otherwise assign relative weight to the specific factors considered and individual directors may have ascribed differing weights to different factors. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Pursuant to an engagement letter dated October 16, 1998, the Company retained Donaldson, Lufkin & Jenrette for the purpose of rendering its opinion regarding the fairness to the holders of Shares of the consideration to be received by such holders in the Offer and the Merger from a financial point of view, to the Company's stockholders. Contemporaneous with the execution and delivery of this engagement letter, the Company paid Donaldson, Lufkin & Jenrette a retainer fee of $100,000. In addition, at the time that Donaldson, Lufkin & Jenrette notified the Board that it was prepared to deliver its opinion regarding the fairness to the holders of Shares of the consideration to be paid to such holders in the Offer and the Merger from a financial point of view, the Company became obligated to pay an additional sum of $500,000. Finally, in the event that the Company requests an update to the opinion of Donaldson, Lufkin & Jenrette, the Company is obligated to pay an additional $100,000 with respect to each such update. The Company will be obligated to pay these fees to Donaldson, Lufkin & Jenrette regardless of the conclusion reached by that firm with regard to the fairness of the consideration to be received by the holders of Shares in the Offer and the Merger. As a part of its engagement of Donaldson, Lufkin & Jenrette, the Company has agreed to indemnify that firm against certain expenses and liabilities arising in connection with their engagement, including liabilities arising under the Federal securities laws. See Item 3(b). "Identity and Background--Potential or Actual Conflicts of Interest--Stoffel Agreement," located at page 13 of this Statement, which discusses obligations of the Company to pay Paul T. Stoffel a fee upon consummation of certain transactions prior to December 31, 2000. 17 Except as set forth above, neither the Company nor any person acting on its behalf currently intends to employ, retain or compensate any person to make solicitations or recommendations to the Company's stockholders. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) From time to time in the past, the Company has purchased shares of its Common Stock in open market transactions or block trades pursuant to Regulation M as promulgated under the Securities Exchange Act of 1934, as amended, when, in the opinion of the Company's management, conditions exist that make such purchases advantageous to the Company. The Company has effected a number of such repurchases during the 60 days preceding the date hereof. Set forth below is a table listing each such transaction.
NO. OF SHARES DATE REPURCHASED PRICE - --------- ------------- --------- 08/19/98 4,250 $ 17.601 08/28/98 4,750 $ 16.475 08/31/98 5,100 $ 15.850 09/01/98 20,000 $ 15.250 09/03/98 75,000 $ 14.877 NO. OF SHARES DATE REPURCHASED PRICE - --------- ------------- --------- 09/03/98 5,100 $ 14.877 09/04/98 5,100 $ 15.375 09/08/98 7,000 $ 15.375 09/09/98 6,300 $ 16.000 09/11/98 2,500 $ 15.875 NO. OF SHARES DATE REPURCHASED PRICE - --------- ------------- --------- 09/18/98 6,100 $ 17.250 09/21/98 296,900 $ 15.500 09/24/98 8,200 $ 15.625 09/25/98 5,000 $ 16.500 09/29/98 3,400 $ 16.875 NO. OF SHARES DATE REPURCHASED PRICE - --------- ------------- --------- 10/01/98 2,000 $ 16.500 10/02/98 4,700 $ 16.500 10/05/98 3,600 $ 16.500 10/06/98 3,600 $ 16.500 10/07/98 3,600 $ 16.500
Except for the issuance of shares of Common Stock upon exercise of outstanding options and such repurchases, no transactions in the Common Stock have been effected during the past 60 days by the Company. To the best of the Company's knowledge, no transactions in the Common stock have been effected by an executive officer, director, subsidiary or affiliate of the Company other than those described below. On the indicated dates and at the indicated prices, Jerrold L. Morrison, the President and Chief Operating Officer of the Company, purchased in open market transactions the following shares of Common Stock: August 25, 1998: 125 shares at $17.00; August 26, 1998: 775 shares at $17.00; August 29, 1998: 3,000 shares at $16.50; August 31, 1998: 600 and 700 shares at $15.75 and $17.25, respectively; September 1, 1998: 1,000 shares at $15.00; and September 2, 1998: 1,000 shares at $15.375. On August 31, 1998, Harvey V. Braswell, President of the Government Services Division of the Company, purchased 1,200 shares of Common Stock at a price of $16.50 per share in an open market transaction. (b) See Item 3(b). "Identity and Background--Potential or Actual Conflicts of Interests--Stock Tender Agreement," located at page 12 of this Statement, which discusses the obligations of Paul T. Stoffel, individually, and Kathryn Ayres Esping, individually and as Independent Executor of the Estate of P.E. Esping and as a Director of the Esping Family Foundation, to tender their Shares pursuant to the Offer. To the best of the Company's knowledge, to the extent permitted by applicable securities laws, rules and regulations, each executive officer, director and affiliate of the Company currently intends to tender all shares of Common Stock over which he or she has sole dispositive power to the Purchaser pursuant to the Offer. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Except as indicated above in Items 3 and 4 with respect to the Offer and the Merger, no discussions or negotiations are being undertaken or are under way by the Company in response to the Offer or the Merger which relate to, or would result in, (i) an extraordinary transaction, such as a merger or reorganization, involving the Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of a material amount of assets by the Company or any subsidiary of the Company, (iii) a tender offer for or other acquisition of securities by, or of, the Company, or (iv) any material change in the present capitalization or dividend policy of the Company, other than, pursuant to the Merger Agreement, the Company has agreed not to declare or pay any dividends on its capital stock while the Offer is pending. 18 (b) Except as indicated above in Items 3 and 4 hereto in connection with the Offer and the Merger, there are no transactions, board resolutions, agreements in principle or signed contracts in response to the Offer which would relate to or would result in one or more of the matters referred to in this Item 7. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. (a) Information Statement The Information Statement attached as Annex B hereto is being furnished in connection with the possible designation by Purchaser, pursuant to the Merger Agreement, of certain persons to be appointed to the Company's Board other than at a meeting of the Company's stockholders as described in Item 3(b), "Identity and Background--The Merger Agreement--Stockholders Meeting" located at page 6 of this Statement. (b) Section 203 of the Delaware General Corporation Law As a Delaware corporation, the Company is subject to Section 203 ("Section 203") of the Delaware General Corporation Law. Under Section 203, certain "business combinations" between a Delaware corporation whose stock is publicly traded or held of record by more than 2,000 stockholders and an "interested stockholder" are prohibited for a three-year period following the date that such a stockholder became an interested stockholder, unless (i) the corporation has elected in its original certificate of incorporation not to be governed by Section 203 (the Company did not make such an election), (ii) the transaction in which the stockholder became an interested stockholder or the business combination was approved by the Board of Directors of the corporation before the other party to the business combination became an interested stockholder, (iii) upon consummation of the transaction that made it an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction (excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan) or (iv) the business combination was approved by the Board of Directors of the corporation and ratified by 66 2/3% of the voting stock which the interested stockholder did not own. The term "business combination" is defined generally to include mergers or consolidations between a Delaware corporation and an "interested stockholder," transactions with an "interested stockholder" involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an "interested stockholder's" percentage ownership of stock. The term "interested stockholder" is defined generally as a stockholder who, together with affiliates and associates, owns (or, within three years prior, did own) 15% or more of a Delaware corporation's voting stock. In accordance with the Merger Agreement and Section 203, the Board approved the Offer, the Merger and the other transactions contemplated by the Merger Agreement and, therefore, the restrictions of Section 203 are inapplicable to the Offer, the Merger and the related transactions. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. 19 (d) Antitrust Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the rules that have been promulgated thereunder by the Federal Trade Commission ("FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer is subject to such requirements. There may be similar antitrust requirements in other jurisdictions. Parent has informed the Company that promptly following the commencement of the Offer, it anticipates filing with the FTC and the Antitrust Division a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer. The Company anticipates filing, with the same authorities, shortly thereafter, a responsive Premerger Notification and Report Form as required under the HSR Act of companies being acquired. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by Parent, unless both the Antitrust Division and the FTC terminate the waiting period prior thereto. If, within such 15-calendar day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material from Parent, the waiting period would be extended for an additional 10 calendar days following substantial compliance by Parent with such request. Thereafter, the waiting period could be extended only by court order. Only one extension of such waiting period pursuant to a request for additional information is authorized by the HSR Act and the rules promulgated thereunder, except by court order. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by Purchaser pursuant to the Offer. At any time before or after the purchase by Purchaser of Shares pursuant to the Offer, either of the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by Purchaser or the divestiture of substantial assets of Parent, its subsidiaries or the Company. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Based upon an examination of publicly available information, and information provided to the Company by Parent, relating to the businesses in which Parent and its subsidiaries are engaged, the Company has determined that the Company and Parent both provide similar services in certain geographic areas. Although the Company believes that the Purchaser's acquisition of Shares pursuant to the Offer would not violate the antitrust laws, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such challenge is made, what the outcome will be. See Item 3(b). "Certain Conditions to the Offer" located at page 10 of this Statement. 20 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Agreement and Plan of Merger, dated October 18, 1998, among Parent, the Company and Purchaser** *** Exhibit 2 Transitional Compensation Agreement, dated October 9, 1998 between the Company and Jerrold L. Morrison** Exhibit 3 Transitional Compensation Agreement, dated October 9, 1998 between the Company and Harvey Braswell** Exhibit 4 Transitional Compensation Agreement, dated October 9, 1998 between the Company and Thomas E. Kiraly** Exhibit 5 Transitional Compensation Agreement, dated October 9, 1998 between the Company and Bernard J. Owens** Exhibit 6 Agreement, dated October 18, 1998 between the Company and Paul T. Stoffel** Exhibit 7 Stock Tender Agreement, dated October 19, 1998, by and between Parent, Purchaser and each of Paul T. Stoffel, individually, and Kathryn Ayres Esping, individually and as Independent Executor of the Estate of P.E. Esping and as Director of the Esping Family Foundation** Exhibit 8 Letter dated October 23, 1998, to the stockholders of the Company from the Chief Operating Officer of the Company* Exhibit 9 Opinion of Donaldson Lufkin & Jenrette dated October 18, 1998* Exhibit Press Release by the Company, dated October 19, 1998** 10
- ------------------------ * These documents are included in the materials mailed to stockholders pursuant to the Offer. ** These documents were filed with the Securities and Exchange Commission as exhibits to this Statement, but were not included in the mailing to stockholders. Such documents and other information may be inspected at the public reference facilities maintained by the Securities and Exchange Commission (the "Commission") at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained at prescribed rates from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the Commission. Such material may also be inspected at the offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. *** Schedules to this Agreement have been omitted but description of such schedules may be found in the Agreement where referred to. The Company hereby undertakes to provide copies of such omitted schedules to the staff of the Securities and Exchange Commission upon request. 21 SIGNATURE (AFTER) REASONABLE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT. BRC HOLDINGS, INC. By: /s/ JERROLD L. MORRISON ----------------------------------------- Jerrold L. Morrison PRESIDENT AND CHIEF OPERATING OFFICER
Date: October 23, 1998 22 ANNEX A OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION [LOGO] October 18, 1998 Board of Directors BRC Holdings, Inc. 1111 West Mockingbird Suite 1400 Dallas, TX 75247 Dear Sirs: You have requested our opinion as to the fairness from a financial point of view to the holders of the outstanding shares of common stock, par value $0.10 per share (the "Shares"), of BRC Holdings, Inc. (the "Company") of the consideration to be received by such stockholders pursuant to the terms of the Agreement and Plan of Merger, to be dated as of October 19, 1998 (the "Agreement"), by and among Affiliated Computer Services, Inc. ("Buyer"), ACS Acquisition Corporation ("MergerCo"), a wholly-owned subsidiary of Buyer, and the Company. Pursuant to the Agreement, MergerCo will commence a tender offer (the "Tender Offer") for 51% of outstanding Shares at a price of $19.00 in cash per Share (the "Offer Price"). The Tender Offer is to be followed by a merger (the "Merger") of MergerCo with and into the Company in which the Shares not tendered into the Tender Offer would be converted, subject to certain exceptions, into the right to receive the Offer Price. The Tender Offer, together with the Merger, is referred to herein as the "Transaction". In arriving at our opinion, we have reviewed the draft dated October 15, 1998 of the Agreement. We also have reviewed financial and other information that was publicly available or furnished to us by the Company including information provided during discussions with management and directors of the Company. Included in the information provided during discussions with management were certain financial projections of the Company for the period beginning January 1, 1998 and ending December 31, 2003 prepared by the management of the Company. In addition, we have compared certain financial and securities data of the Company with various other companies whose securities are traded in public markets, reviewed the historical stock prices and trading volumes of the Shares of the Company, reviewed prices paid in certain other business combinations and conducted such other financial studies, analyses and investigations as we deemed appropriate for purposes of this opinion. We have been engaged by the Board of Directors of the Company and the Company solely to render an opinion as to the fairness from a financial point of view to the holders of Shares of the consideration to be received by such shareholders pursuant to the Transaction. We have not been engaged to assist in negotiating the financial or other terms of the Transaction or to provide advice as to any particular acquisition proposal. In addition, we were not requested to, nor did we, solicit the interest of any other party in acquiring the Company. In rendering our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by the Company or its representatives, or that was otherwise reviewed by us. With respect to the financial projections supplied to us by management of the Company, we have assumed that they have been reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of the Company as to the future operating and financial performance of the Company. We A-1 have not assumed any responsibility for making an independent evaluation of any assets or liabilities or for making any independent verification of any of the information reviewed by us. We have relied as to certain legal matters on advice of counsel to the Company. Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. Our opinion does not address the relative merits of the Transaction and the other business strategies being considered by the Company's Board of Directors, nor does it address the Board's decision to proceed with the Transaction. This opinion is for the use and benefit of the Board of Directors of the Company in connection with its consideration of the Transaction. Our opinion does not constitute a recommendation to any stockholder as to whether such stockholder should tender Shares pursuant to the Tender Offer or how such stockholder should vote on the proposed Transaction. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. DLJ has performed investment banking and other services for the Buyer in the past, including acting as comanager for the Buyer's convertible debt offering in March 1998, and has been paid customary fees for such services. Based upon the foregoing and such other factors as we deem relevant, we are of the opinion that the consideration to be received by the holders of Shares pursuant to the Transaction is fair to such shareholders from a financial point of view. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ Tom C. Davis ----------------------------------- Tom C. Davis MANAGING DIRECTOR A-2 ANNEX B INFORMATION STATEMENT BRC HOLDINGS, INC. 1111 W. MOCKINGBIRD LANE, SUITE 1400 DALLAS, TEXAS 75247-5014 ------------------------ INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER --------------------- This Information Statement (the "Information Statement") is being mailed on or about October 23, 1998, as part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of shares of Common Stock at the close of business on or about October 20, 1998. You are receiving this Information Statement in connection with the possible appointment of persons designated by Purchaser to serve on the Company's Board of Directors (the "Board"). The Merger Agreement provides that, at the time Purchaser shall purchase and pay for any Shares, Purchaser shall be entitled to designate the minimum number of directors that will constitute a majority of total number of seats on the Board (including those seats which Purchaser designates directors to fill). This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 thereunder. See "Change in Board of Directors Upon Consummation of the Offer--Right to Designate Directors; Purchaser Designees." You are urged to read this Information Statement carefully. You are not, however, required to take any action. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the accompanying Schedule 14D-9. Pursuant to the Merger Agreement, the Purchaser commenced the Offer on October 23, 1998. The Offer is scheduled to expire at 12:00 midnight on November 20, 1998, unless Purchaser extends the Offer. The Offer is conditioned on, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer a minimum of 8,704,238 shares of Common Stock (approximately 51% of the outstanding shares of Common Stock on a fully diluted basis) (the "Minimum Amount"), and (ii) the expiration or termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended. The Offer is also subject to certain other terms and conditions. Upon the expiration of the Offer, if all conditions of the Offer have been satisfied or waived (including the tender of at least the Minimum Amount of shares), Purchaser has agreed to purchase the Minimum Amount of shares validly tendered pursuant to the Offer and not withdrawn. In the event that more than the Minimum Amount of shares are validly tendered prior to the Expiration Date and not withdrawn, the Purchaser will, upon the terms and subject to the conditions of the Offer, accept such shares for payment on a pro rata basis, with adjustments to avoid purchase of fractional shares, based upon the number of shares so tendered. The information contained in this Information Statement concerning the Purchaser has been furnished to the Company by Parent and the Purchaser, and the Company assumes no responsibility for the accuracy or completeness of such information. B-1 CHANGE IN BOARD OF DIRECTORS UPON CONSUMMATION OF THE OFFER GENERAL The shares of Common Stock are the only class of voting securities of the Company outstanding. Each share has one vote. As of October 21, 1998, the Company had 13,720,644 shares outstanding. The number of members that constitutes the entire Board is five members, with one position being vacant. Each director holds office until such director's successor is duly elected and qualified or until such director's earlier resignation or removal. RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES BOARD REPRESENTATION. The Merger Agreement provides that at the time Purchaser shall purchase and pay for the Shares, Purchaser shall be entitled to designate the minimum number of directors that will constitute a majority of total number of seats on the Board (including those seats which Purchaser designates directors to fill). The Company expects the Purchaser to exercise this right. In furtherance thereof, the Company is obligated to either increase the size of the Board or secure the resignations of such number of incumbent directors, or both, as is necessary to enable the appropriate number of Purchaser's designees to be elected or appointed to the Company's Board. Notwithstanding the foregoing, the Company has the right under the Merger Agreement to have at least two of its current directors remain on the Board. In the event that the Purchaser exercises its right to name a majority of the members of the Board, the Company intends to secure the resignations of two of its current directors, thus retaining two positions on the Board and allowing Purchaser to designate three directors to be elected or appointed to fill the vacancies created by such resignations. The Company's obligation to elect or appoint such designees to the Board is subject to Section 14(f) of the Exchange Act. The Company is required to take all action necessary to effect such election or appointment and to include in this Information Statement the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. PURCHASER DESIGNEES. Information concerning the Purchaser's designees to serve on the Board (the "Purchaser Designees") is set forth in Exhibit A hereto. Such information was provided by the Purchaser and the Company does not assume any responsibility for the accuracy or completeness thereof. To the best knowledge of the Company, none of the Purchaser Designees beneficially owns any equity securities in the Company. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY DIRECTORS The names of the Company's current directors, their ages as of October 21, 1998 and certain other information about them are set forth below. As indicated above, it is anticipated that two of the directors of the Company will be requested to resign effective as of the consummation of the Offer. No decision has been made as of the date hereof regarding which of the Company's directors will be asked to resign if the Purchaser exercises its rights to designate persons to serve as members of the Board of Directors. Directors hold office until the next annual meeting of stockholders or until their respective successors have been duly elected and qualified. PAUL T. STOFFEL, age 64, has been a director of the Company since March 1989 and is Chairman of the Audit Committee of the Board of Directors. Mr. Stoffel has been Chairman of the Board of Directors of the Company since September 16, 1998. Mr. Stoffel is Chairman of Paul Stoffel Capital Corporation which engages in various public and private investments. He is also a director of Centex Corporation which is engaged in the residential construction and development industry. Mr. Stoffel was Managing Director of Paine Webber, Inc., an investment banking company, from 1979 through 1985. B-2 L. D. BRINKMAN, age 69, has been a director of the Company since January 1989. Mr. Brinkman serves on the Compensation Committee of the Board of Directors. He has been Chairman of the Board, Chief Executive Officer and President of LDB Corporation since 1970. LDB Corporation owns and franchises Mr. Gatti's restaurants. ROBERT E. MASTERSON, age 53, has been a director of the Company since May 1995. Mr. Masterson is Chairman of Service Data Corporation and has served in such capacity since 1991. From 1986 to 1991, Mr. Masterson was owner and President of Masterson Properties, a real estate and investment company. He served as a division President with American Express Company in the travel, corporate card and information services divisions from 1984 to 1986. Prior to that time, Mr. Masterson was President and Chief Executive Officer of First Data Resources, Inc., a subsidiary of American Express which provides data processing services. DAVID H. MONNICH, age 67, has been a director of the Company since January 1989, serves on the Audit Committee and is Chairman of the Compensation Committee of the Board of Directors. Mr. Monnich is Chairman and Chief Executive Officer of Crown Steel, Inc. and has served in such capacity since January 1996. Mr. Monnich was President and Chief Executive Officer of DHM Corporation, a private holding company, prior to 1996. Mr. Monnich sought protection under the United States Bankruptcy Code on June 16, 1995 and received a discharge under Chapter 7, thereof, on October 28, 1995. EXECUTIVE OFFICERS Executive officers are elected by the Board of Directors at its annual meeting and subject to the discretion of the Board of Directors, hold office until its next annual meeting or until their successors have been duly elected and qualified. The names of the Company's current executive officers, their ages as of October 21, 1998 and certain other information about them are set forth below. JERROLD L. MORRISON, age 43, is President and Chief Operating Officer and has served is such capacity since January 1996. He was Executive Vice President of the Company since February 1, 1995 and also has served as President of BRC Health Care, Inc., a wholly owned subsidiary of the Company, from August 1995 to June 1996. Previously he spent seven years as an executive officer of Newtrend, L.P., a financial products and services company in Orlando, Florida serving as President of the client server division the last two years of that period. HARVEY V. BRASWELL, age 53, has been the President of the Government Services Division of the Company since November 1996. Upon joining the Company in January 1996, he served as Vice President of Information Services and Senior Vice President of Operations for the Government Services Division. From 1976 to September 1995, Mr. Braswell held executive management positions with Electronic Data Systems in their Government Systems and Health Care Divisions. Mr. Braswell currently serves on the Board of Directors of the North Carolina Electronics and Information Technologies Association, an organization comprised of executives from technology companies located in North Carolina, which seeks to provide its members a forum for discussing industry trends and issues. WILLIAM J. FOSICK, age 51, has been President of The Pace Group, Inc., a wholly-owned subsidiary of the Company, since November 1997. Prior to that time, Mr. Fosick served as a Senior Vice President of The Pace Group, Inc. from 1993 to November 1997. From 1989 to 1993 Mr. Fosick was the general manager of managed care operations with Employer's Health Insurance, a national health insurance provider. Mr. Fosick also currently serves as a member of the Board of Directors of the Mayo Health Plan in Jacksonville, Florida, a health care services provider. THOMAS E. KIRALY, age 38, has been the Company's principal financial and accounting officer since December 1988. Mr. Kiraly has held the title of Chief Financial Officer since March 1994. Prior to that time, he served as Vice President of Finance. He formerly was a Senior Management Consultant with B-3 Touche Ross & Co., a predecessor to Deloitte & Touche, a national accounting firm, from May 1985 until December 1988. BERNARD J. OWENS, age 52, has been President of the Company's Government Records Management division since July 1996 and has been Executive Vice President of the Company since June 1992. He was President of the Eastern Region from May 1989 to June 1992. He was Vice President of its Northeast Region from 1984 through May 1989. COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS The Board of Directors has established the Audit Committee, the Compensation Committee, and the Nominating Committee to assist the Board of Directors in carrying out its duties. The Audit Committee's duties include engaging and discharging the Company's independent auditors; reviewing and approving the engagement of the auditors for audit and non-audit services; reviewing with the independent accountants the fee, scope, and timing of the audit and non-audit services; reviewing the completed audit with the independent accountants regarding their report, the conduct of the audit, any accounting adjustments and recommendations for improving internal controls, and any other significant findings during the audit; meeting periodically with the Company's management, financial staff and auditors to discuss internal accounting and auditing procedures; initiating and supervising any special investigations it deems necessary; and reviewing significant press releases concerning financial matters. The Audit Committee consists of Messrs. Stoffel and Monnich and is chaired by Mr. Stoffel. The Compensation Committee periodically reviews the Company's compensation, employee benefit plans, and other fringe benefits paid to or provided for officers and directors of the Company and approves the annual salaries and bonuses of officers of the Company and executive officers of the Company's subsidiaries. The Compensation Committee also selects the employees to whom options may be granted under the Company's option plans and generally administers the option plans. The Compensation Committee consists of Messrs. Brinkman and Monnich and is chaired by Mr. Monnich. During 1997 the Board of Directors held three meetings (excluding five actions by unanimous consent). The Audit Committee held one meeting and the Compensation Committee held one meeting during the year. With the exception of Mr. Masterson with respect to his attendance at one meeting, all members of the Board of Directors attended all of their respective board and committee meetings during 1997. B-4 BENEFICIAL OWNERSHIP OF THE COMPANY'S STOCK PRINCIPAL STOCKHOLDERS The following table sets forth, as of October 21, 1998, certain information with respect to those persons known to the Company to be the beneficial owners of 5% or more of the outstanding shares of Common Stock of the Company.
NAME AND ADDRESS OF PERCENT OF BENEFICIAL OWNER NUMBER OF SHARES(1) NATURE OF BENEFICIAL OWNERSHIP CLASS(2) - -------------------------------------- ------------------- ---------------------------------------- ------------- Kathryn A. Esping, ................... 2,833,032(3) Sole voting and investment power 20.2% individually and as Independent 127,858(3) Shared voting and investment power 0.9% Executor for the Estate of P.E. Esping 4330 Bordeaux Dallas, TX 75205 First Pacific Advisors, Inc. ......... 1,388,000(4) Shared voting and investment power 10.1% 11400 West Olympic Blvd., 124,000(4) Shared investment power 0.9% Suite 1200, Los Angeles, CA 90064 Wallace R. Weitz & Co. ............... 738,800(5) Sole voting and investment power 5.4% 1125 South 103rd Street, Suite 600, Omaha, NE 68124 Wanger Asset Management, L.P., . 711,600(6) Shared voting and investment power 5.2% Wanger Asset Mgmt., Ltd., 227 West Monroe, Suite 3000, Chicago, IL 60606
- ------------------------ (1) All are shares of Common Stock. (2) Based on 13,720,644 shares of Common Stock outstanding on October 21, 1998 and the number of shares, if any, as to which the named person has the right to acquire beneficial ownership upon the exercise of such person's options. (3) According to information provided by Mrs. Esping and contained in a statement on Schedule 13D dated July 24, 1998 and filed with the Securities and Exchange Commission, Mrs. Esping, in her capacity as Independent Executor of the Estate of P.E. Esping, holds 2,528,516 shares of Common Stock. Mrs. Esping also may be deemed to be the beneficial owner of 300,000 shares of Common Stock which are issuable upon the exercise of presently exercisable stock options, 4,516 shares of Common Stock in the Company 401(k) plan and 127,858 shares held of record by the Esping Family Foundation of which Mrs. Esping is a Director; such shares are included in the figures noted in the table. (4) Based upon information contained in the statement on Schedule 13G (and after giving effect to the 100% stock dividend of the Company effective April 6, 1998 for record holders as of March 20, 1998 (the "April Stock Dividend")) dated February 11, 1993 as amended through Amendment No. 6 dated February 9, 1998 filed with the Securities and Exchange Commission by First Pacific Advisors, Inc., First Pacific Advisors, Inc. is an investment advisor acting as record holder for institutional investors, including investment companies and pension funds. First Pacific Advisors, Inc. has indicated that it believes it shares voting and disposition authority with its clients by reason of the contractual arrangements it has with those parties. First Pacific Advisors, Inc. has advised the Company that, by B-5 virtue of a contract with a specific client, it has no voting authority with respect to 124,000 of the aggregate shares shown in the table above. (5) Based upon information contained in a statement on Schedule 13G (and after giving effect to the April Stock Dividend) dated February 7, 1990 filed with the Securities and Exchange Commission by Wallace R. Weitz & Company and amended through Amendment No. 7 dated February 11, 1998. (6) Based upon information contained on Schedule 13G (and after giving effect to the April Stock Dividend) dated March 5, 1998 filed with the Securities and Exchange Commission by Wanger Asset Management, Ltd., for itself and as general partner for Wanger Asset Management, L.P. ("WAM"). WAM is an investment company registered under the Investment Company Act of 1940. The shares reported have been acquired on behalf of discretionary clients of WAM. BENEFICIAL OWNERSHIP BY EXECUTIVE OFFICES AND DIRECTORS The following table sets forth, as of October 21, 1998, certain information with respect to the Company's shares of Common Stock beneficially owned by (i) each of the current directors, (ii) each of the executive officers of the Company named in the Summary Compensation Table below (excluding Mr. Esping), and (iii) all of the executive officers and directors of the Company as a group.
PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) NATURE OF BENEFICIAL OWNERSHIP CLASS(2) - ----------------------------------------- ------------------- ------------------------------------- ------------- L.D. Brinkman............................ 54,000(3) Sole voting and investment power 0.4% Robert E. Masterson...................... 24,200(4) Sole voting and investment power 0.2% David H. Monnich......................... 24,000(5) Sole voting and investment power 0.2% Paul T. Stoffel.......................... 331,460(6) Sole voting and investment power 2.4% Jerrold L. Morrison...................... 328,699(7) Sole voting and investment power 2.3% Bernard J. Owens......................... 151,108(8) Sole voting and investment power 1.1% William J. Fosick........................ 47,128(9) Sole voting and investment power 0.3% Harvey V. Braswell....................... 41,098(10) Sole voting and investment power 0.3% All directors and officers as a group (9 persons)............................... 1,128,993(11) Sole voting and investment power 7.8%
- ------------------------ (1) All are shares of Common Stock. (2) Based on 13,720,644 shares of Common Stock outstanding on October 21, 1998 and the number of shares, if any, as to which the named person has the right to acquire beneficial ownership upon the exercise of such person's options. (3) Represented by 30,000 shares of Common Stock which Mr. Brinkman is the record holder and 24,000 shares issuable under options which are presently exercisable. Excludes 36,000 shares subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (4) Represented by 200 shares of Common Stock for which Mr. Masterson is the record holder and 24,000 shares issuable under stock options which are presently exercisable. Excludes 36,000 shares subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (5) Represented by 24,000 shares issuable under stock options which are presently exercisable. Excludes 36,000 shares subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. B-6 (6) Represented by 307,460 shares of Common Stock for which Mr. Stoffel is the record holder and 24,000 shares issuable under stock options which are presently exercisable. Excludes 36,000 shares subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (7) Represented by 9,800 shares of Common Stock for which Mr. Morrison is the record holder, 316,667 shares issuable under stock options which are presently exercisable and 2,232 shares which are held on Mr. Morrison's behalf by the Company 401(k) plan. Excludes 73,333 shares that are subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (8) Represented by 25,040 shares of Common Stock for which Mr. Owens is the record holder, 124,000 shares issuable under options which are presently exercisable and 2,068 shares which are held on Mr. Owens' behalf by the Company 401(k) plan. Excludes 90,000 shares that are subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (9) Represented by 36,728 shares of Common Stock for which Mr. Fosick is the record holder and 10,400 shares issuable under options which are presently exercisable. Excludes 55,600 shares that are subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (10) Represented by by 2,400 shares of Common Stock for which Mr. Braswell is the record holder, 38,335 shares issable under options which are presently exercisable or will become exercisable within 60 days and 363 shares which are held on Mr. Braswell's behalf by the Company 401(k) plan. Excludes 111,665 shares that are subject to options that are not currently, nor within 60 days, exercisable, but that will become exercisable upon consummation of the Offer. (11) Includes 705,402 shares subject to employee stock options that are presently exercisable, or will become exercisable within sixty days. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act, requires the Company's directors and executive officers and persons who own more than 10% of the Company's Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors, and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 1997 all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with. COMPENSATION OF DIRECTORS Each director who is not an officer of the Company or a subsidiary receives an annual fee of $8,000 plus $500 for each Board of Directors or Committee meeting attended. In addition, Committee chairmen who are not officers of the Company or a subsidiary receive an annual fee of $1,000. B-7 COMPENSATION OF EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table sets forth certain information regarding compensation paid during each of the Company's last three fiscal years to the Company's former Chief Executive Officer, each of the Company's four most highly compensated executive officers, and one individual who would have been one of the Company's four most highly compensated officers had there not been a change in his status as an officer of the Company. The determination of total compensation is based on salary, bonuses, and other cash compensation earned during fiscal 1997. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ----------------------------------- AWARDS ANNUAL COMPENSATION ------------------------- PAYOUTS ---------------------------------------- SECURITIES ------- OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER NAME AND FISCAL COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(5) AWARD(S) (#)(11) ($) ($)(9) - -------------------- ------ ---------- ------------ ------------ ---------- ------------ ------- ------------ P. E. Esping(2) .... 1997 257,692 -- -- -- -- -- 3,325 Chairman and Chief 1996 250,000 -- -- -- -- -- 3,150 Executive Officer 1995 265,000 -- -- -- 150,000 -- 3,150 Morrison, Jerrold 1997 250,000(7) 75,000(8) -- -- -- -- 3,325 L. ............... 1996 249,039 -- 49,610 -- 50,000 -- 1,393 President and 1995 69,308(4) 37,000 9,664 -- 125,000 -- 969 Chief Operating Officer Pace, Ray(3) ....... 1997 170,289 186,299 -- -- -- -- 1,425 President, The 1996 59,916(4) -- -- -- 135,000 -- -- Pace Group 1995 -- -- -- -- -- -- -- Owens, Bernard ..... 1997 200,000 96,813(8) -- -- -- -- 3,325 Executive Vice 1996 200,000 104,205(6) -- -- -- -- 3,150 President 1995 200,000 -- -- -- 25,000 -- 3,150 Fosick, 1997 133,096 146,000 -- -- -- -- 1,354 William(3) ....... 1996 49,320(4) 10,001 -- -- 13,000 -- -- President, The 1995 -- -- -- -- -- -- -- Pace Group Braswell, Harvey ... 1997 164,942(10) 102,772(8) 257 -- -- -- 2,759 President, 1996 114,462 50,000(6) 54,607 -- 30,000 -- 2,045 Government 1995 -- -- -- -- -- -- -- Services Division
- ------------------------------ (1) Unless otherwise noted, reflects bonus earned during the fiscal year but paid during the next year. (2) Mr. Esping died on June 30, 1998. Mr. Stoffel was elected Chairman of the Board on September 16, 1998. (3) Mr. Pace resigned from his position as President of The Pace Group on November 10, 1997 and has been included in the table in that he would have been listed as one of the Company's four most highly compensated executive officers for fiscal year 1997 had there not been a change in his officer status. Mr. Fosick succeeded Mr. Pace as President of The Pace Group on November 10, 1997. (4) Reflects compensation for only a portion of the fiscal year paid to the listed individual as measured from the date of commencement of the individual's employment by the Company through the end of the fiscal year. Mr. Morrison became employed by the Company on February 1, 1995. Mr. Pace and Mr. Fosick became employed by the Company on September 5, 1996. (5) Reflects compensation associated with relocation expenses. (6) With respect to Mr. Owens, of the total amount, $42,393 was paid in March 1997 for performance during 1996, the remainder was paid during the 1996 fiscal year. With respect to Mr. Braswell, of the total amount $25,000 was paid in March 1997 for performance during 1996, the remainder was paid during the 1996 fiscal year. (7) Effective January 1, 1998, Mr. Morrison's base salary was increased to $275,000 per year. (8) With respect to Mr. Owens, of the total amount, $47,312 was paid in February 1998 for performance during 1997, the remainder was paid during the 1997 fiscal year. With respect to Mr. Braswell, of the total amount $54,437 was paid in February 1998 for performance during 1997, the remainder was paid during the 1997 fiscal year. With respect to Mr. Morrison, of the total amount, $18,750 was paid in March 1998 for performance during 1997, the remainder was paid during the 1997 fiscal year. (9) Amounts represent Company contributions to the Company's 401(k) Plan on the behalf of the listed individuals. B-8 (10) Effective March 1, 1998, Mr. Braswell's base salary was increased to $200,000 per year. (11) Amounts give effect to the April Stock Dividend. OPTION GRANTS DURING 1997 FISCAL YEAR There were no grants of stock options or stock appreciation rights during the fiscal year ended December 31, 1997 to the named executives. OPTION EXERCISES DURING 1997 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table provides information related to options and warrants exercised by the named executive officers during the 1997 fiscal year and the number and value of options held at fiscal year end. The Company does not have any outstanding stock appreciation rights. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
VALUE OF UNEXERCISED NUMBER OF SECURITIES IN-THE-MONEY UNDERLYING UNEXERCISED OPTIONS/SAR'S OPTIONS/SAR'S AT FISCAL YEAR-END AT FISCAL YEAR-END (#)(3) ($)(2)(3) SHARES ACQUIRED VALUE -------------------------- -------------------------- NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------- ------------------- ----------------- ----------- ------------- ----------- ------------- P. E. Esping(4).......... -- -- 200,000 100,000 150,000 75,000 Morrison, Jerrold L...... -- -- 199,998 150,002 441,664 283,336 Pace, Ray................ -- -- 90,000 180,000 585,000 1,170,000 Owens, Bernard........... -- -- 107,334 16,666 395,000 12,500 Fosick, William.......... -- -- 8,668 17,332 56,344 112,660 Braswell, Harvey......... -- -- 19,166 40,834 3,126 9,376
- ------------------------ (1) Value is calculated based on the difference between the option exercise price and the closing market price of the Common Stock on the date of exercise multiplied by the number of shares to which the exercise relates. (2) The closing price for the Company's Common Stock as reported by The Nasdaq Stock Market as of December 31, 1997 was $19.125 (after giving effect to the April Stock Dividend). Value is calculated on the basis of the difference between the option exercise price and $19.125 (after giving effect to the April Stock Dividend) multiplied by the number of shares of Common Stock underlying the option. (3) Amounts give effect to the April Stock Dividend. (4) Does not reflect acceleration of exercisability on Mr. Esping's death. CERTAIN TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS TRANSITION AGREEMENTS See Item 3(b). "Identity and Background--Potential or Actual Conflicts of Interest--Transition Agreements," located on page 12 of Schedule 14D-9, for a description of the Transition Agreement. STOCK TENDER AGREEMENT See Item 3(b). "Identity and Background--Potential or Actual Conflicts of Interest--Stock Tender Agreement," located on page 12 of Schedule 14D-9, for a description of the Stock Tender Agreement. STOFFEL AGREEMENT See Item 5. "Persons Retained, Employed or to Be Compensated," located on page 17 of Schedule 14D-9, for a description of an the Stoffel Agreement. B-9 EXHIBIT A PURCHASER DESIGNEES Set forth below are the name, current business address, present principal occupation and employment history (covering a period of not less than five years) of each Purchaser Designee. Unless otherwise indicated, each such person's business address is 2828 North Haskell, Dallas, Texas 75204. All persons listed below are citizens of the United States of America.
PRESENT PRINCIPAL OCCUPATION AND NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS - ------------------------ ---------------------------------------------------------------------------------------- Jeffrey A. Rich Mr. Rich, age 38, has served as President and Chief Operating Officer of Parent since April 1995 and as a director since August 1991. Mr. Rich joined Parent in 1989 as Senior Vice President and Chief Financial Officer and was named Executive Vice President in 1991. Mr. Rich is also the President and a director of the Purchaser. Prior to joining Parent, Mr. Rich served as a Vice President of Citibank N.A. from March 1986 through June 1989, and also served as an Assistant Vice President of InterFirst Bank Dallas, N.A. from 1982 until March 1986. David W. Black Mr. Black, age 36, has served as Executive Vice President, Secretary and General Counsel and as a director of Parent since May 1995. Mr. Black joined Parent in February 1995 as Associate General Counsel. Mr. Black is also the Secretary and a director of the Purchaser. Prior to joining Parent, Mr. Black was an attorney engaged in private practice in Dallas from 1986 through January 1995. Henry G. Hortenstine Mr. Hortenstine, age 54, has served as Executive Vice President of Parent since March 1995, as Group President of ACS Technology Solutions Group since April 1998 and as a director since September 1996. Mr. Hortenstine is also a director of the Purchaser. Prior to that time, he served as Senior Vice President--Business Development from July 1993 to March 1995. Mr. Hortenstine was engaged by Parent as a consultant providing various business and corporate development services from 1990 to July 1993. Prior to that, he was Senior Executive Vice President of Lomas Mortgage USA, a subsidiary of Lomas Financial Corporation, from 1987 to 1989.
B-10 EX-1 2 EXHIBIT 1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER AMONG AFFILIATED COMPUTER SERVICES, INC., ACS ACQUISITION CORPORATION, AND BRC HOLDINGS, INC. OCTOBER 19, 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER TABLE OF CONTENTS
PAGE ---- RECITALS ARTICLE I The Tender Offer 1.1. The Tender Offer. . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.2. Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . .3 1.3. Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE II The Merger 2.1. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.2. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.3. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . .5 2.4. Certificate of Incorporation. . . . . . . . . . . . . . . . . . . . .5 2.5. Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.6. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.7. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.8. Conversion of the Shares. . . . . . . . . . . . . . . . . . . . . . .6 2.9. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.10. Conversion of the Common Stock of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.11. Payment for Shares. . . . . . . . . . . . . . . . . . . . . . . . . .7 2.12. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 ARTICLE III Representations and Warranties of the Company 3.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . .8 3.2. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.3. Authorized Capital. . . . . . . . . . . . . . . . . . . . . . . . . 10 3.4. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . 10 3.5. Approvals; No Violations. . . . . . . . . . . . . . . . . . . . . . 10 3.6. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . 11 3.7. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . . 11 3.8. Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . 12 3.9. Termination, Severance, and Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . 12 -i- 3.10. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.12. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 14 3.14. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . 16 3.15. Finders and Investment Bankers; Transaction Expenses. . . . . . . . 16 3.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.17. Title to Properties; Entire Business. . . . . . . . . . . . . . . . 16 3.18. Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . 16 3.19 Largest Customers . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.20 Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . . 17 3.21 Certain Material Contract . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE IV Representations and Warranties of the Parent and the Purchaser 4.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . 17 4.2. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . 18 4.3. Approvals; No Violations. . . . . . . . . . . . . . . . . . . . . . 18 4.4. No Prior Activities . . . . . . . . . . . . . . . . . . . . . . . . 18 4.5. Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . 19 4.6. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE V Covenants 5.1. Conduct of Business of the Company. . . . . . . . . . . . . . . . . 19 5.2. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 22 5.3. Action of Stockholders of the Company; Voting and Disposition of the Shares. . . . . . . . . . . . . . . . 22 5.4. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . 23 5.5. Notification of Certain Matters . . . . . . . . . . . . . . . . . . 23 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . 23 5.7. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . 25 5.8. Officers' and Directors' Indemnification. . . . . . . . . . . . . . 25 5.9. Other Actions by the Company. . . . . . . . . . . . . . . . . . . . 25 5.10. Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE VI Conditions to Consummation of the Merger 6.1. Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . 26 6.2. No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.3. Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.4. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . 26 -ii- ARTICLE VII Termination; Amendment; Waiver 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 28 7.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 29 7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 7.5. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE VIII Miscellaneous 8.1. Survival of Representations, Warranties, and Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8.2. Brokerage Fees and Commissions. . . . . . . . . . . . . . . . . . . 30 8.3. Entire Agreement; Assignment. . . . . . . . . . . . . . . . . . . . 31 8.4. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 8.7. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . 32 8.8. Other Potential Bidders . . . . . . . . . . . . . . . . . . . . . . 33 8.9. Descriptive Headings; References. . . . . . . . . . . . . . . . . . 34 8.10. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . 34 8.11. Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.13. Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.14. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . 34
Annex A Certain Conditions Annex B-1 List of Those Signing the Stock Tender Agreement Annex B-2 Stock Tender Agreement Schedules [Note: Schedules to this Agreement have been omitted from this filing but descriptions of such Schedules may be found in the Agreement where referred to.] AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated as of October 19, 1998, by and among AFFILIATED COMPUTER SERVICES, INC., a Delaware corporation (the "PARENT"), ACS ACQUISITION CORPORATION, a Delaware corporation and a wholly-owned subsidiary of the Parent (the "PURCHASER"), and BRC HOLDINGS, INC., a Delaware corporation (the "COMPANY"). RECITALS The Boards of Directors of the Parent and the Company have unanimously determined that it is in the best interests of the stockholders of their respective corporations for the Purchaser to acquire all the outstanding common stock, par value $.10 per share, of the Company (the "SHARES"). The parties intend to effect such acquisition through a tender offer on the terms described below, followed by a merger of the Company with the Purchaser on the terms described below (the "MERGER"). THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which all parties hereby acknowledge, the parties agree as follows: ARTICLE I THE TENDER OFFER 1.1 THE TENDER OFFER. (a) Provided that this Agreement has not been terminated in accordance with ARTICLE VII and none of the events referred to in ANNEX A (other than the events referred to in CLAUSES (i) and (ii) of the second paragraph of ANNEX A and CLAUSE (j) of ANNEX A) has occurred or is existing, within five business days of the date of this Agreement, the Purchaser will commence a tender offer (the "OFFER"), subject to the Minimum Condition described below, to purchase a total of at least 8,704,238 Shares (which will represent not less than 51% of the outstanding Shares on a fully diluted basis) at a price of $19.00 per Share (as such amount may be increased in accordance with the terms of this Agreement, the "PER SHARE AMOUNT") net to the seller in cash. The Purchaser agrees to accept for payment a total of at least 8,704,238 Shares validly tendered pursuant to the Offer as soon as legally permissible, and to pay for all such Shares as promptly as practicable, upon the terms and subject to the conditions of the Offer, as it may be revised as permitted by this Agreement. The obligation of Purchaser to commence the Offer will be subject only to conditions set forth in ANNEX A, and the obligation of Purchaser to accept for payment, purchase, and pay for the Shares tendered pursuant to the Offer will be subject to such conditions and to the further condition that 8,704,238 Shares have been validly tendered and not withdrawn prior to the expiration date of the offer (the "MINIMUM CONDITION"). If the Minimum Condition is not satisfied on any Expiration Date of the Offer, the Purchaser may, in Purchaser's discretion, extend the Offer for a period or periods not to exceed, in the aggregate, ten business days. The Purchaser specifically reserves the right to increase the price per share payable in the -1- Offer, to extend the expiration date of the Offer (unless, after January 31, 1999, all conditions to the Offer listed on ANNEX A are fulfilled), and to make any other changes in the terms and conditions of the Offer (provided that, unless previously approved by the Company in writing, no change may be made that decreases the price per Share payable in the Offer, that changes the form of consideration to be paid in the Offer, that reduces the minimum number of Shares to be purchased in the Offer, that imposes conditions to the Offer in addition to those set forth in ANNEX A, or that broadens the scope of such conditions). Notwithstanding the foregoing, Purchaser (i) shall extend the Offer for any period required by any rule, regulation or interpretation of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer, and (ii) may, without the consent of the Company, extend the Offer for an aggregate period of not more than 10 business days beyond the latest applicable date that would otherwise be permitted under clause (i) of this sentence if, as of such date, all of the offer conditions are satisfied or waived by Purchaser, but the number of Shares validly tendered and not withdrawn pursuant to the Offer is less than 90% of the then outstanding Shares on a fully diluted basis. The parties agree that the conditions set forth in ANNEX A are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances giving rise to any such condition (including any action or inaction by the Purchaser or the Parent, if such action or inaction by the Purchaser or the Parent is not taken knowingly or intentionally for the purpose of breaking the Minimum Condition or one or more of the conditions contained in ANNEX A) or may be waived by the Purchaser, in whole or in part, at any time and from time to time, in its sole discretion. The failure by the Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to other facts or circumstances, and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. Any good faith determination by the Purchaser with respect to any of the foregoing conditions (including, without limitation, the satisfaction of such conditions) will be final and binding on all parties. The Per Share Amount will be paid net to the seller in cash, less any required withholding taxes, on the terms and subject to the conditions of the Offer. If at the time of the Expiration Date (or at the expiration of a proper extension), the Company is purchasing Shares pursuant to the Offer and if at such time a greater number of Shares than 8,704,238 Shares has been tendered into the Offer and not withdrawn, then 8,704,238 Shares will be purchased on a pro rata basis. The Company agrees that no Shares held by the Company or any of its subsidiaries will be tendered in the Offer. The Company hereby consents to the Offer and represents that (a) its Board of Directors, at a meeting duly called and held (i) determined at such time that the Offer and the Merger, taken together, are fair to the Company and its stockholders and in the best interests of the holders of the Shares; (ii) resolved at such time to recommend acceptance of the Offer and approval and adoption of this Agreement, the Merger, and the transactions contemplated by this Agreement by the stockholders of the Company prior to such purchase; and (iii) irrevocably approved the Offer, the Merger, this Agreement, and the transactions contemplated by this Agreement for the purposes of Section 203 of the Delaware General Corporation Law (the "DGCL") and any other state or federal statute, regulation, or rule that the Purchaser has identified, or that is known after reasonable inquiry, to the Company requiring prior approval by the Board of Directors of the Company of this Agreement, the Merger, the Offer, or the other transactions contemplated by this Agreement and (b) Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), the Company's financial advisor (the "ADVISOR"), has delivered to the -2- Board of Directors of the Company its opinion that, subject to the limitations and qualifications set forth in such opinion, the Per Share Amount is fair from a financial point of view to the holders of the Shares. (b) As promptly as practicable on the date of the commencement of the Offer, the Parent and the Purchaser will file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which will (i) reflect the execution and delivery of this Agreement; (ii) set forth the Offer as provided for in this Agreement; and (iii) contain or incorporate by reference a form of letter of transmittal and summary advertisement. (c) The Purchaser will promptly disseminate the offer to purchase referred to in SECTION 1.1(b) (as amended pursuant to this Agreement, the "OFFER TO PURCHASE" and, collectively with all other schedules and exhibits required to be filed with the SEC, the "OFFER DOCUMENTS") to the holders of the Shares, reflecting the terms set forth in this Agreement. The Offer Documents will contain the recommendation of the Board of Directors of the Company that the holders of the Shares accept the Offer as described in SECTION 1.1(a) and may make reference to the opinion of the Advisor referred to in SECTION 1.1(a) and include or incorporate such opinion. The Purchaser and the Company, with respect to written information supplied by the Company specifically for use in the Offer Documents or based upon information pertaining to the Company in the Company Reports (as defined in SECTION 3.6), agree promptly to correct any information in the Offer Documents that becomes false or misleading in any material respect. Subject to SECTION 1.2(b), the Purchaser further agrees to take all steps to cause the Offer Documents to be disseminated to the holders of Shares, as and to the extent required by applicable law. The Company and its counsel will be given an opportunity to review and comment on the Offer Documents prior to their being filed with the SEC. The Parent and the Purchaser will promptly provide to the Company any written comments they receive from the SEC with respect to the Offer Documents. 1.2 COMPANY ACTIONS. (a) The Company hereby agrees to file with the SEC as soon as practicable on or after the date of commencement of the Offer, and promptly mail to its stockholders, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all schedules, amendments, and supplements, the "SCHEDULE 14D-9") containing the recommendations of the Board of Directors of the Company referred to in SECTION 1.1 (subject to the right of the Board of Directors of the Company to withdraw such recommendations if it is obligated to do so by its fiduciary obligations under applicable law) and the opinion of the Advisor referred to in SECTION 1.1(a). The Purchaser and its counsel will be given an opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC. The Company will promptly provide to the Parent and the Purchaser any written comments it receives from the SEC with respect to the Schedule 14D-9. (b) The Company has been advised that the persons named on ANNEX B-1 have entered into the Stock Tender Agreement in the form of ANNEX B-2 (the "STOCK TENDER AGREEMENT"). The Schedule 14D-9, at the time it is first published, disseminated, or mailed to the stockholders of the Company, will not contain any untrue statement of a material fact or omit -3- to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Company agrees promptly to take all steps necessary to cause the Schedule 14D-9 to be corrected to the extent requested by the Parent to reflect any change in information concerning the Parent, the Purchaser, or the Offer, and, as corrected, to be filed with the SEC and disseminated to the stockholders of the Company, as and to the extent required by applicable law. (c) In connection with the Offer, the Company will promptly furnish the Purchaser with mailing labels, security position listings, and any available listing or computer files containing the names and addresses of the record holders of Shares as of the most recent practicable date and will furnish the Purchaser with such information and assistance (including updated lists of security position listings and listing or computer files) as the Purchaser or its agents may reasonably request in order to communicate the Offer to the record and beneficial holders of Shares. Subject to applicable law and except for such steps as are necessary to disseminate the Offer Documents, the Purchaser and its affiliates will hold in confidence the information contained in any such labels, listings, and files, will use such information only in connection with the Offer and the Merger, and, if this Agreement is terminated, will deliver to the Company all copies of such information in its possession. 1.3 BOARD OF DIRECTORS. (a) Effective upon the payment by the Purchaser for Shares pursuant to the Offer, the Purchaser will be entitled to designate that number of directors of the Company, rounded up to the next whole number, that equals the product of (x) the total number of directors on the Board of Directors (giving effect to the election or appointment of any additional directors pursuant to this SECTION 1.3) and (y) the percentage that the number of Shares on a fully diluted basis owned by the Parent and the Purchaser (including Shares accepted for payment) bears to the total number of outstanding Shares. The Board of Directors of the Company will at all relevant times be composed of a sufficient number of directors so that the right of the Purchaser under this SECTION 1.3(a) and the right of the Company under SECTION 1.3(b) to have at least 2 Continuing Directors (as defined in SECTION 1.3(b)) will not be impaired. The Company will at such time cause the designees of the Purchaser to be elected to or appointed by the Board of Directors, including, without limitation, increasing the number of directors, amending its bylaws, using its reasonable best efforts to obtain resignations of incumbent directors, and, to the extent necessary, filing with the SEC and mailing to its stockholders the information required by Section 14(f) of the Exchange Act and the rules promulgated thereunder, as promptly as possible. The Parent and the Purchaser will supply any information with respect to themselves and their respective nominees, officers, directors, and affiliates required by Section 14(f) of the Exchange Act and such rules to the Company. Upon written request by the Purchaser, the Company will use its reasonable best efforts to cause the designees of the Purchaser to constitute the same percentage of representation as is on the Board of Directors after giving effect to this SECTION 1.3 on (i) each committee of the Board of Directors; (ii) the board of directors of each subsidiary of the Company; and (iii) each committee of such subsidiaries' boards of directors. (b) Following the election or appointment of the designees of the Purchaser pursuant to this SECTION 1.3 and prior to the Effective Time, any amendment or termination of this Agreement, extension for the performance of the obligations or other acts of the Parent and the -4- Purchaser, or waiver of the rights of the Company under this Agreement, will (if and to the extent that there are any then serving directors of the type specified below) require the approval of a majority of the then serving directors of the Company who are directors on the date of this Agreement (the "CONTINUING DIRECTORS"). Prior to the Effective Time, there will be no fewer than 2 Continuing Directors. If, prior to the Effective Time, the number of Continuing Directors is one, such remaining Continuing Director will be entitled to appoint directors to fill the vacancies created and such appointees will be Continuing Directors for the purposes of this Agreement. The Continuing Directors may not be removed prior to the Effective Time. ARTICLE II THE MERGER 2.1 THE MERGER. Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, the Purchaser will be merged with and into the Company as soon as practicable following the satisfaction or waiver of the conditions set forth in ARTICLE VI. Following the Merger, the Company will continue as the surviving corporation (the "SURVIVING CORPORATION") and the separate corporate existence of the Purchaser will cease. At the election of the Parent or the Purchaser, any one or more direct or indirect wholly-owned subsidiaries of the Parent incorporated under the laws of the State of Delaware may be substituted for the Purchaser as a constituent corporation in the Merger. As used in this Agreement, the term "Purchaser" refers to any such substituted corporation. 2.2 EFFECTIVE TIME. The Merger will be consummated by filing with the Delaware Secretary of State a certificate of merger or certificate of ownership and merger in accordance with the DGCL (the "CERTIFICATE OF MERGER") in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL, and such other documents as may be required by the provisions of the DGCL. The Merger will be effective at the time of such filing or at such later time as is specified in the Certificate of Merger in accordance with the provisions of the DGCL. Such time of effectiveness is referred to as the "EFFECTIVE TIME." 2.3 EFFECTS OF THE MERGER. The Merger will have the effects set forth in Section 259 of the DGCL. As of the Effective Time, the Company will be a wholly-owned direct or indirect subsidiary of the Parent. Without limiting the foregoing, at the Effective Time, all properties, rights, privileges, powers, and franchises of the Company and the Purchaser will vest in the Surviving Corporation and all debts, liabilities, obligations, and duties of the Company and the Purchaser will become the debts, liabilities, obligations, and duties of the Surviving Corporation. 2.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the Company as in effect at the Effective Time will be the Certificate of Incorporation of the Surviving Corporation until amended in accordance with applicable law, except that at the election of the Purchaser, the Company will amend its Certificate of Incorporation immediately prior to the Effective Time to conform as nearly as possible to the Certificate of Incorporation of the Purchaser. -5- 2.5 BYLAWS. The Bylaws of the Purchaser as in effect immediately prior to the Effective Time will be the Bylaws of the Surviving Corporation until amended in accordance with applicable law. 2.6 DIRECTORS. The directors of the Purchaser at the Effective Time will be the initial directors of the Surviving Corporation and will hold office from the Effective Time until their respective successors are duly elected or appointed and qualified. 2.7 OFFICERS. The officers of the Company at the Effective Time will be the initial officers of the Surviving Corporation and will hold office from the Effective Time until their respective successors are duly elected or appointed and qualified. 2.8 CONVERSION OF THE SHARES. At the Effective Time: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than (i) Shares held by the Parent, the Purchaser, the Company, or any direct or indirect subsidiary of the Parent or the Company and (ii) any Dissenting Shares (as defined in SECTION 2.9)) will, without further action by the Parent, the Purchaser, or the Company, automatically be canceled and extinguished and converted into the right to receive in cash the Per Share Amount (the "MERGER CONSIDERATION") without interest, less any required withholding taxes, upon surrender of the certificate formerly representing such Share in accordance with SECTION 2.11. (b) Each Share issued and outstanding immediately prior to the Effective Time that is owned or held by the Parent, the Purchaser, the Company, or any direct or indirect subsidiary of Parent or the Company will be canceled and retired and cease to exist, without any conversion, and no payment will be made with respect to any such Share. 2.9 DISSENTING SHARES. (a) Notwithstanding anything in this Agreement to the contrary, Shares that are issued and outstanding immediately prior to the Effective Time and that are held by stockholders that have complied in all respects with the requirements of the DGCL concerning the right of a stockholder of the Company to dissent from the Merger and to require an appraisal of such Shares in the manner provided in the DGCL, if applicable, and that, as of the Effective Time, have not effectively withdrawn or lost such right to appraisal (the "DISSENTING SHARES") will not be converted into or represent a right to receive the Merger Consideration pursuant to SECTION 2.8, but the holders of such Dissenting Shares will be entitled only to such rights as are granted under Section 262 of the DGCL. Each holder of Dissenting Shares that becomes entitled to payment for such Shares pursuant to such section of the DGCL will receive payment for such Dissenting Shares from the Surviving Corporation in accordance with the DGCL; PROVIDED, HOWEVER, that to the extent that any holder or holders of Shares have failed to establish the entitlement to appraisal rights as provided in Section 262 of the DGCL, such holder or holders (as the case may be) will forfeit the right to appraisal of such Shares and each such Share will thereupon be deemed to have been converted, as of the Effective Time, into and represent the right to receive payment from the Surviving Corporation of the Merger Consideration, without interest, as provided in SECTION 2.8. -6- (b) The Company will give the Parent and the Purchaser (i) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal, and any other instrument served pursuant to Section 262 of the DGCL received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Section 262 of the DGCL. The Company will not, except with the express written consent of the Parent, voluntarily make any payment with respect to any demands for appraisal or settle or offer to settle any such demands. 2.10 CONVERSION OF THE COMMON STOCK OF THE PURCHASER. Each share of the common stock of the Purchaser issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of the holder of such stock, be converted into and represent one validly issued, fully paid, and nonassessable share of common stock, par value $.10 per share, of the Surviving Corporation. 2.11 PAYMENT FOR SHARES. (a) Prior to the Effective Time, the Purchaser will appoint a bank or trust company reasonably acceptable to the Company as agent for the holders of Shares (the "PAYING AGENT") to receive and disburse the cash to which holders of Shares become entitled pursuant to SECTION 2.8. At the Effective Time, the Purchaser or the Parent will provide the Paying Agent with sufficient cash to allow the Merger Consideration to be paid by the Paying Agent for each Share then entitled to receive the Merger Consideration (the "PAYMENT FUND"). (b) Promptly after the Effective Time, the Purchaser or the Parent will cause the Paying Agent to mail to each record holder immediately prior to the Effective Time of an outstanding certificate or certificates representing Shares that as of the Effective Time represent the right to receive the Merger Consideration (the "CERTIFICATES"), a form of letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon proper delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates for payment. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal duly executed and completed in accordance with its instructions and such other documents as may be requested, the holder of such Certificate will be entitled to receive in exchange for such Certificate, subject to any required withholding of taxes, the Merger Consideration and such Certificate will forthwith be canceled. No interest will be paid or accrued on the Merger Consideration upon the surrender of the Certificates. If payment or delivery is to be made to a person other than the person in whose name the Certificate surrendered is registered, it will be a condition of payment or delivery that the Certificate so surrendered be properly endorsed, with signature properly guaranteed, or otherwise be in proper form for transfer and that the person requesting such payment or delivery pay any transfer or other taxes required by reason of the payment or delivery to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this SECTION 2.11, each Certificate (other than Certificates held by persons referred to in SECTION 2.8(a)(i) and (ii)) will represent for all purposes only the right to receive the Merger Consideration, without interest and subject to any required withholding of taxes. Notwithstanding the foregoing, neither the Paying Agent nor any party to this Agreement will be -7- liable to a holder of Shares for any Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat, or similar laws. (c) Promptly following the date that is six months after the Effective Time, the Paying Agent will return to the Surviving Corporation all cash, certificates, and other property in its possession that constitute any portion of the Payment Fund, and the duties of the Paying Agent will terminate. Thereafter, each holder of a Certificate formerly representing a Share may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat, and similar laws) receive in exchange therefor the Merger Consideration without any interest. Neither the Parent, the Purchaser, nor the Surviving Corporation will be liable to any holder of Shares for any amount paid to a public official pursuant to applicable abandoned property, escheat, or similar laws. If Certificates are not surrendered prior to midnight on the fourth anniversary of the Effective Time, unclaimed amounts of the Payment Fund will, to the extent permitted under applicable law, become the property of the Surviving Corporation. Notwithstanding the foregoing, the Surviving Corporation will be entitled to receive from time to time all interest or other amounts earned with respect to the Payment Fund as such amounts accrue or become available. (d) Any portion of the Payment Fund for which rights to dissent have been perfected will be returned to the Surviving Corporation upon demand. (e) After the Effective Time there will be no registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. 2.12 CLOSING. Upon the terms and subject to the conditions of this Agreement, as soon as practicable after all the conditions to the obligations of the parties to effect the Merger under ARTICLE VI have been satisfied or waived, the Company and the Purchaser will (a) file with the Secretary of State of Delaware the Certificate of Merger and (b) take all such other and further actions as may be required by law to make the Merger effective. Contemporaneous with the filing referred to in this SECTION 2.12, a closing (the "CLOSING") will be held at the offices of Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800, Dallas, Texas or at such other location as the parties to this Agreement may establish for the purpose of confirming all the foregoing. The date and the time of such Closing are referred to as the "CLOSING DATE." ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to the Parent and the Purchaser that: 3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority and any necessary governmental authority to own, operate, and lease its properties and assets and to carry on its business as it is now being conducted, except for failures to have such power and authority as is not reasonably expected to -8- result in a Company Material Adverse Effect (as defined below). The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification or licensing necessary, except for failures to be so qualified or licensed and in good standing as is not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. Copies of the Certificate of Incorporation and Bylaws of the Company, including all amendments, have been delivered to the Parent and the Purchaser and such copies are accurate and complete. The Certificate of Incorporation and Bylaws of the Company are in full force and effect and the Company is not in default of the performance, observation, or fulfillment of any provision of its Certificate of Incorporation or Bylaws. For the purposes of this Agreement, "COMPANY MATERIAL ADVERSE EFFECT" means any change or effect, other than a change or effect involving MatriDigm Corporation, that, individually or when taken together with all such other changes or effects, is reasonably expected to be materially adverse to the condition (financial or other), business, operations, properties, assets, liabilities, prospects, or results of operations of the Company and its subsidiaries, taken as a whole. 3.2 SUBSIDIARIES. The Company is, directly or indirectly, the record and beneficial owner of all the outstanding shares of capital stock of each of its subsidiaries (other than directors' qualifying shares), there are no proxies or voting agreements with respect to any such shares, and no equity security of any of its subsidiaries is or may become required to be issued by reason of any options, warrants, scrip, rights to subscribe to, calls, or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any subsidiary, and there are no contracts, commitments, understandings, or arrangements by which any subsidiary is bound to issue additional shares of its capital stock or securities convertible into or exchangeable for such shares. All such shares directly or indirectly owned by the Company are owned by the Company or a wholly owned subsidiary, free and clear of any claim, lien, encumbrance, or agreement. Each subsidiary of the Company is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the requisite corporate power and authority and any necessary governmental authority to own, operate, or lease its properties and assets and to carry on its business as it is now being conducted, except for failures as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. Each subsidiary of the Company is duly qualified or licensed to do business and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification or licensing necessary, except for failures to be so qualified, licensed, or in good standing as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. Copies of the charter documents, bylaws, or equivalent organizational documents of each subsidiary of the Company have been delivered to the Parent and are accurate and complete. Neither the Company nor any subsidiary of the Company (a) beneficially owns any material equity interests in any entities that are not subsidiaries of the Company or (b) is party to any material joint venture, partnership, or similar arrangement other than its joint venture with Logan Systems, Inc. and its interest in the United Records joint venture. -9- 3.3 AUTHORIZED CAPITAL. The authorized capital stock of the Company consists solely of 30,000,000 shares of common stock, $.10 par value per share, of which 13,738,144 shares were outstanding as of September 30, 1998, and 2,000,000 shares of preferred stock, $10.00 par value per share, of which no shares are outstanding. All of the outstanding Shares have been duly authorized and are validly issued, fully paid, nonassessable, and free of preemptive rights. There are outstanding options to purchase up to 3,328,989 Shares. Except as set forth above or on SCHEDULE 3.3 and there are no preemptive rights nor any outstanding subscriptions, options, warrants, rights, convertible securities, or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities of the Company or any of its subsidiaries. There are no voting trusts or other understandings to which the Company or any of its subsidiaries is a party with respect to the voting capital stock of the Company or any of its subsidiaries. 3.4 CORPORATE AUTHORIZATION. The Company has the full corporate power and authority to execute and deliver this Agreement and, subject to any necessary stockholder approval of the Merger, to consummate the transactions contemplated by this Agreement. The execution, delivery, and performance by the Company of this Agreement and the consummation by the Company of the Merger and of the other transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action and, except for any required approval of the Merger and any adoption of this Agreement by the stockholders of the Company in connection with the consummation of the Merger, no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 3.5 APPROVALS; NO VIOLATIONS. Except for applicable requirements of the Exchange Act and the Hart-Scott-Rodino Anti-trust Improvements Act of 1976 (the "HSR ACT") and the filing of the Certificate of Merger as required by the DGCL, no filing with, and no permit, authorization, consent, or approval of, any foreign or domestic public body or authority is necessary for the consummation by the Company of the transactions contemplated by this Agreement. Except as set forth on SCHEDULE 3.5, the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions contemplated by this Agreement and the compliance by the Company with any of the provisions of this Agreement will not (a) conflict with or result in any breach of any provision of the charters of bylaws or equivalent organizational documents of the Company or any of its subsidiaries; (b) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration) under, any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement, or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound; or (c) violate any order, writ, injunction, decree, statute, rule, or regulation applicable to the Company, any of its subsidiaries or any of their properties or assets; except such violations, conflicts, breaches, defaults, terminations, or accelerations referred to in this SECTION 3.5 as are not, individually or in -10- the aggregate, reasonably expected to result in a Company Material Adverse Effect or materially adversely affect the ability of any party to perform its obligations under this Agreement. 3.6 SEC FILINGS; FINANCIAL STATEMENTS. At least since December 31, 1993, the Company has timely filed with the SEC all forms, reports, statements, and documents required to be filed by it pursuant to the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "SECURITIES ACT"), and the Exchange Act, and the rules and regulations promulgated thereunder, together with all amendments thereto (collectively, and including, when filed, the Schedule 14d-9, the "COMPANY REPORTS") and has otherwise complied in all material respects with the requirements of the Securities Act and the Exchange Act. The Company will promptly deliver to the Purchaser any Company Report filed by the Company after the date of this Agreement. As of their respective dates, the Company Reports did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were or will be made, not misleading. Each of the historical consolidated balance sheets included in or incorporated by reference into the Company Reports as of its date and each of the historical consolidated statements of income and earnings, stockholders' equity, and cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents or will fairly present the consolidated financial condition, results of operations, stockholders' equity, and cash flows, as the case may be, of the Company and its subsidiaries for the periods set forth (subject, in the case of unaudited statements, to normal year-end audit adjustments), in each case in accordance with generally accepted accounting principles consistently applied during the periods involved. The Company maintains a system of internal accounting controls sufficient to provide that transactions are executed in accordance with management's general or specific authorization, transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, access to assets is permitted only in accordance with management's general or specific authorization, and the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the consolidated balance sheet of the Company as of September 30, 1998, and except as set forth in the Company Reports, neither the Company nor any of its subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent, or otherwise, that would be required to be included on a consolidated balance sheet of the Company and its subsidiaries as of September 30, 1998 prepared in accordance with generally accepted accounting principles, and that are, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. Since September 30, 1998, the Company and its subsidiaries have conducted their respective businesses in a manner consistent with past practices, and neither the Company nor any of its subsidiaries has become subject to any liabilities or obligations that would be required to be included on a consolidated balance sheet of the Company and its subsidiaries prepared in accordance with generally accepted accounting principles and that are, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect, other than liabilities or obligations incurred in the ordinary course of business consistent with past practices or incurred in connection -11- with the Offer, this Agreement, or the Merger and disclosed in the Company Reports or consisting of reasonable legal, printing, accounting, and other customary fees incurred in connection with the Offer, this Agreement, or the Merger. 3.8 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its subsidiaries currently hold and are in compliance with the terms of all licenses, permits, and authorizations necessary for the lawful conduct of their respective businesses, and have complied with, and neither the Company nor any of its subsidiaries is in violation of, or in default under, the applicable statutes, ordinances, rules, regulations, orders, or decrees of any federal, state, local, or foreign governmental bodies, agencies, or authorities having, asserting, or claiming jurisdiction over it or over any part of its operations or assets, except for violations that would not, individually or in the aggregate, result in a Company Material Adverse Effect. The businesses of the Company and its subsidiaries are not being and have not been conducted in violation of any law, ordinance, or regulation of any governmental authorities and regulatory agencies except for violations as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. No investigation or review by any governmental authorities and regulatory agencies with respect to the Company or any of its subsidiaries is pending or, to the best knowledge of the Company, threatened, nor, to the best knowledge of the Company, have any governmental authorities and regulatory agencies indicated an intention to conduct such an investigation or review, and no fine has been levied against, or order entered with respect to, the Company or any subsidiary by any regulatory authority. 3.9 TERMINATION, SEVERANCE, AND EMPLOYMENT AGREEMENTS. Set forth on SCHEDULE 3.9 is a complete and accurate list of each (a) employment, severance, or collective bargaining agreement not terminable without liability or obligation on 60 days' or less notice; (b) agreement with any director, executive officer, or other key employee, agent, or contractor of the Company or any subsidiary of the Company (i) the benefits of which are contingent, or the terms of which are materially altered, on the occurrence of a transaction involving the Company or any subsidiary of the Company of the nature of any of the transactions contemplated by this Agreement or relating to an actual or potential change in control of the Company or any of its subsidiaries or (ii) providing any term of employment or other compensation guarantee or extending severance benefits or other benefits after termination not comparable to benefits available to employees, agents, or contractors generally; (c) agreement, plan, or arrangement under which any person may receive payments that may be subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the "CODE") or included in the determination of such person's "parachute payment" under Section 280G of the Code; and (d) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan, or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement; provided that no matter need be described in SCHEDULE 3.9 which is otherwise specifically described or referenced herein or which involves payments in the aggregate of less than $100,000 by the Company. Except as disclosed on SCHEDULE 3.9, since December 31, 1995, neither the Company nor any of its subsidiaries has entered into or amended any employment or severance agreement with any director, officer, or key employee, agent, or contractor, or, granted any -12- severance or termination pay to any officer, director, or key employee, agent, or contractor of the Company or any of its subsidiaries. 3.10 EMPLOYEE BENEFITS. No "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) ("PENSION PLAN") is a "multiemployer plan" (within the meaning of ERISA), nor has the Company, or any of its subsidiaries or any other person that, together with the Company, is or has been treated as a single employer under Section 414(b), (c), (m), or (o) of the Code (each a "COMMONLY CONTROLLED ENTITY") ever contributed or been required to contribute to any multiemployer plan. Each Pension Plan intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service that it is so qualified and nothing has occurred since the date of such letter that is reasonably expected to affect the qualified status of such Pension Plan. None of the "employee welfare benefit plans" (as defined in Section 3(1) of ERISA), or other plans, arrangements, or policies relating to stock options, stock purchases, compensation, deferred compensation, severance, fringe benefits, and other employee benefits, in each case maintained, or contributed to, or required to be maintained or contributed to, by the Company or any Commonly Controlled Entity for the benefit of any current or former employees, officers, agents, or directors (or any beneficiaries of such persons) of the Company or any of its subsidiaries (collectively, "BENEFIT PLANS") promises or provides medical benefits to any person after termination of employment with the Company or any agency of the Company, except as otherwise required by law in the applicable jurisdiction. Each individual who is paid for services in any form by the Company or any Commonly Controlled Entity and who is treated by the Company or a Commonly Controlled Entity as an independent contractor for federal income tax purposes (including, without limitation, Code provisions applicable or relating to employee benefit plans), state unemployment tax purposes, or any other purpose, is an independent contractor for such purpose. Except where it is not reasonably expected to result in a Company Material Adverse Effect: (a) each Benefit Plan has been administered in accordance with its terms; (b) the Company and all the Benefit Plans are all in compliance with applicable provisions of ERISA, the Code, and all other applicable laws; (c) each Benefit Plan could be amended or terminated without liability to the Company, any Commonly Controlled Entity, the Purchaser, or the Parent on or at any time after the Effective Time; (d) neither the Company nor any Commonly Controlled Entity has incurred any liability, and no event has occurred that would result in any liability, to a Pension Plan (other than for contributions not yet due) or to the Pension Benefit Guaranty Corporation (other than for payment of premiums not yet due) that has not been fully paid; (e) neither the Company nor any Commonly Controlled Entity has incurred any direct or indirect liability under, arising out of, or by operation of Title IV of ERISA, in connection with the termination of, or withdrawal from, any Pension Plan or other requirement plan or arrangement, and no fact or event exists that is reasonably expected to give rise to any such liability; and (f) the aggregate accumulated benefit obligations of each Pension Plan subject to Title IV of ERISA do not exceed the fair market value of the assets of such Pension Plan. 3.11 TAXES. The Company and its subsidiaries have timely filed all federal income tax returns and reports and other material returns and reports relating to federal, state, local, and foreign taxes required to be filed. Such reports and returns are true, correct and complete, except for such failures to be true, correct and complete as are not, individually or in the aggregate, -13- reasonably expected to result in a Company Material Adverse Effect. The Company and its subsidiaries have paid or made adequate provision for all taxes owed except taxes that if not so paid or provided for is not reasonably expected to result in a Company Material Adverse Effect, and, except as disclosed in SCHEDULE 3.11, no unpaid deficiencies in taxes or other governmental charges for any period have been proposed or assessed by any government taxing authority and, to the knowledge of the Company, no government tax authority is threatening to propose or assess against the Company or any of its subsidiaries any such deficiency or charge that is, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. The Company and its subsidiaries have withheld or collected and paid over to the appropriate governmental authorities or are properly holding for such payment all taxes required by law to be withheld or collected, except for such failures to have so withheld or collected and paid over, or to be so holding for payment as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect. There are no material liens for taxes upon the assets of the Company or its subsidiaries, other than liens for current taxes not yet due and payable and liens for taxes that are being contested in good faith by appropriate proceedings diligently prosecuted. Neither the Company nor any of its subsidiaries has agreed to or is required to make any adjustment under Section 481(a) of the Code. Neither the Company nor any of its subsidiaries has made any election under Section 341(f) of the Code. 3.12 LITIGATION. There is no suit, claim, action, proceeding, or investigation pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries or any of their respective properties or assets before any court, regulatory agency, or tribunal as to which an adverse determination is reasonably considered probable that, individually or in the aggregate, is reasonably expected to result in a Company Material Adverse Effect. Neither the Company nor any of its subsidiaries is subject to any outstanding order, writ, injunction, or decree that, individually or in the aggregate, is reasonably expected to result in a Company Material Adverse Effect or would prevent or delay the consummation of the transactions contemplated by this Agreement. 3.13 ENVIRONMENTAL MATTERS. Except for matters disclosed in SCHEDULE 3.13 and except for matters that are not reasonably expected to result, individually or in the aggregate with all other such matters, in liability to the Company or any of its subsidiaries in excess of $200,000, (i) the properties, operations and activities of the Company and its subsidiaries are in compliance with all applicable Environmental Laws; (ii) the Company and its subsidiaries and the properties and operations of the Company and its subsidiaries are not subject to any existing, pending or, to the knowledge of the Company, threatened action, suit, claim, investigation, inquiry or proceeding by or before any governmental authority under any Environmental Laws; (iii) all notices, permits, licenses, or similar authorizations, if any, required to be obtained or filed by the Company or any of its subsidiaries under any Environmental Laws in connection with any aspect of the business of the Company or its subsidiaries, including without limitation those relating to the treatment, storage, disposal or release of a hazardous or otherwise regulated substance, have been duly obtained or filed and will remain valid and in effect after the Merger, and the Company and its subsidiaries are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations; (iv) the Company and its subsidiaries have satisfied and are currently in compliance with all financial responsibility requirements applicable to their operations and -14- imposed by any governmental authority under any Environmental Laws, and the Company and its subsidiaries have not received any notice of noncompliance with any such financial responsibility requirements; (v) to the Company's knowledge, there are no physical or environmental conditions existing on any property of the Company or its subsidiaries or resulting from the Company's or such subsidiaries' operations or activities, past or present, at any location, that would give rise to any on-site or off-site remedial obligations imposed on the Company or any of its subsidiaries under any Environmental Laws or that would impact the soil, groundwater or surface water or human health (to the extent of exposure to hazardous substances); (vi) to the Company's knowledge, since the effective date of the relevant requirements of applicable Environmental Laws and to the extent required by such applicable Environmental Laws, all hazardous or otherwise regulated substances generated by the Company and its subsidiaries have been transported only by carriers authorized under Environmental Laws to transport such substances and wastes, and disposed of only at treatment, storage, and disposal facilities authorized under Environmental Laws to treat, store or dispose of such substances and wastes; (vii) there has been no exposure of any person or property to hazardous substances or any pollutant or contaminant, nor has there been any release of hazardous substances, or any pollutant or contaminant into the environment by the Company or its subsidiaries or in connection with their properties or operations that is reasonably expected to give rise to any claim against the Company or any of its subsidiaries for damages or compensation; and (viii) subject to restrictions necessary to preserve any attorney client privilege, the Company and its subsidiaries have made available to Parent all internal and external environmental audits and studies and all correspondence on substantial environmental matters in the possession of the Company or its subsidiaries relating to any of the current or former properties or operations of the Company and its subsidiaries. For purposes of this Agreement, the term "ENVIRONMENTAL LAWS" shall mean any and all laws, statutes, ordinances, rules, regulations, or orders of any Governmental Entity pertaining to health (to the extent of exposure to hazardous substances) the environment currently in effect in any and all jurisdictions in which the Company and its subsidiaries own property or conduct business, including without limitation, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing federal laws, and all other environmental conservation or protection laws. For purposes of this Agreement, the terms "hazardous substance" and "release" have the meanings specified in CERCLA and RCRA and shall include petroleum and petroleum products, radon and PCB's, and the term "disposal" has the meaning specified in RCRA; PROVIDED, HOWEVER, that to the extent the laws of the state in which the property is located establish a meaning for "hazardous substance," "release," or "disposal" that is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply. -15- 3.14. VOTING REQUIREMENTS. The Board of Directors of the Company has approved the Offer, the Merger and this Agreement, and such approval is sufficient to render inapplicable to the Offer, the Merger and the Agreement the provisions of Section 203 of the DGCL. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock in favor of adoption of this Agreement and the Merger is the only vote of the holders of any class or series of the Company's capital stock necessary to approve this Agreement and the transactions contemplated hereby under any applicable law, rule or regulations or pursuant to the requirements of the Company's certificate of incorporation or bylaws. 3.15. FINDERS AND INVESTMENT BANKERS; TRANSACTION EXPENSES. Neither the Company nor any of its officers or directors has employed any investment banker, business consultant, financial advisor, broker or finder in connection with the transactions contemplated by this Agreement, except for DLJ and Paul Stoffel, or incurred any liability for any investment banking, business consultancy, financial advisory, brokerage or finders' fees or commissions in connection with the transactions contemplated hereby, except for fees payable to DLJ (as reflected in agreements between such firms and the Company, copies of which have been delivered to Parent). 3.16. INSURANCE. The Company and each of its subsidiaries are currently insured, and during each of the past five calendar years have been insured, for reasonable amounts against such risks as companies engaged in a similar business and similarly situated would, in accordance with good business practice, customarily be insured. 3.17. TITLE TO PROPERTIES; ENTIRE BUSINESS. The Company and its subsidiaries have good title or a valid and subsisting leasehold interest in and to or a valid and enforceable license to use all material assets, properties and rights owned, used or held of use by them in the conduct of their respective businesses, in each case, free and clear of any Liens other than Permitted Liens. The Company and its subsidiaries own or have sufficient right to use all assets and properties necessary to conduct their businesses in the manner in which they are currently conducted. As used herein, "PERMITTED LIENS" mean: (i) a lien of a landlord, carrier, warehouseman, mechanic, materialman, or any other statutory lien arising in the ordinary course of business; (ii) a lien for taxes not yet due or being contested in good faith; (iii) with respect to the right of the Company or its subsidiaries to use any property leased to the Company or its subsidiaries, arises by the terms of the applicable lease; (iv) a purchase money security interest arising in the ordinary course of business; or (v) does not materially detract from the value of the encumbered property or assets or materially detract from or interfere with the use of the encumbered property or assets in the ordinary course of business. 3.18. INTELLECTUAL PROPERTY RIGHTS. Except as set forth in SCHEDULE 3.18, the Company and its subsidiaries have the right to use all of the material trademarks and trade names utilized by it in the conduct of its business and any other computer software and software licenses, intellectual property, proprietary information, trade secrets, trademarks, trade names, copyrights, material and manufacturing specifications, drawings and designs used by the Company or any of its subsidiaries and material to the operation of the business of the Company or any of its subsidiaries (collectively, "Intellectual Property"), without infringing on or otherwise acting adversely to the rights or claimed rights of any person, except to the extent such infringement or -16- actions adverse to another's rights or claimed rights is not reasonably expected to have a Company Material Adverse Effect. Except as set forth on such SCHEDULE 3.18, neither the Company nor any of its subsidiaries is obligated to pay any royalty or other consideration material to the Company and its subsidiaries taken as a whole to any person in connection with the use of any Intellectual Property. Except as set forth in such SCHEDULE 3.18 and as is not reasonably expected to have a Company Material Adverse Effect, to the Company's knowledge, no other person is infringing on the rights of the Company and its subsidiaries in any of their Intellectual Property. 3.19 LARGEST CUSTOMERS. The Company has made available to Parent a list of the 10 largest customers by dollar volume of the Company and its subsidiaries (the "LARGEST CUSTOMERS"), with the amount of revenues attributable to each such customer, for each fiscal years ending December 31, 1996 and 1997. Except as previously disclosed, none of the Largest Customers has terminated or materially altered its relationship with the Company since January 1, 1996 or, to the Company's knowledge, threatened to do so or otherwise notified the Company of its intention to do so, and there has been no material dispute with any of the Largest Customers since January 1, 1996. 3.20 YEAR 2000 COMPLIANCE. The disclosures in the Company's Annual Report on Form 10-K for the year ending December 31, 1997 and in its Quarterly Report on Form 10-Q for the quarter ending June 30, 1998 regarding the "status of Year 2000 Compliance" met the applicable standards (as generally understood by legal practitioners) required with regard thereto as of the dated filed, and such disclosures continue to be correct, in light of the circumstances made and when measured against the disclosure standards sought to be satisfied, in all material respects as if made on the date of this Agreement. 3.21 CERTAIN MATERIAL CONTRACTS. The Company has disclosed to the Purchaser and the Parent all agreements and arrangements (whether written or oral and including all amendments thereto) to which the Company or any of its Subsidiaries is a party or a beneficiary or by which the Company or any of its Subsidiaries is bound that are material, directly or indirectly, to the business of the Company and any of its Subsidiaries, taken as a whole (collectively, the "MATERIAL CONTRACTS"). The Company and its Subsidiaries have performed all of its obligations under each Material Contract, and there exist no breach or default, or event that with notice or lapse of time would constitute a breach or default under any Material Contract except as is not reasonably expected to have a Company Material Adverse Effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER Each of the Parent and the Purchaser represents and warrants to the Company as follows: 4.1 ORGANIZATION AND QUALIFICATION. Each of the Parent and the Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority and any necessary governmental -17- authority to carry on its business as now conducted. Each of the Parent and the Purchaser is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of its properties owned or leased or the nature of its activities makes such qualification or licensing necessary, except for failures to be so duly qualified or licensed and in good standing as are not, individually or in the aggregate, reasonably expected to result in a Parent Material Adverse Effect. For the purposes of this Agreement, "PARENT MATERIAL ADVERSE EFFECT" means any change or effect that, individually or when taken together with all such other changes or effects, are reasonably expected to be materially adverse to the condition (financial or other), business, operations, properties, assets, liabilities, prospects, or results of operations of the Parent and its subsidiaries, taken as a whole. 4.2 CORPORATE AUTHORIZATION. Each of the Parent and the Purchaser has the full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution, delivery, and performance by each of the Parent and the Purchaser of this Agreement and the consummation by the Parent and the Purchaser of the Merger and of the other transactions necessary for such consummation have been duly and validly authorized by the Parent as sole stockholder of the Purchaser and by the Board of Directors of each of the Parent and the Purchaser and no other corporate proceedings on the part of the Parent or the Purchaser are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by each of the Parent and the Purchaser and constitutes a valid and binding obligation of each of the Parent and the Purchaser, enforceable in accordance with its terms. 4.3 APPROVALS; NO VIOLATIONS. Except for applicable requirements of the Exchange Act and the HSR Act and the filing and recordation of the Certificate of Merger as required by the DGCL, no filing with, and no permit, authorization, consent, or approval of any foreign or domestic public body or authority is necessary for the consummation by the Parent and the Purchaser of the transactions contemplated by this Agreement. Neither the execution and delivery of this Agreement by the Parent and the Purchaser nor the consummation by the Parent and the Purchaser of the transactions contemplated by this Agreement nor compliance by them with any of the provisions of this Agreement will (a) conflict with or result in any breach of any provision of the organizational documents or bylaws of the Parent or the Purchaser; (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, or acceleration under), any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement, or other instrument or obligation to which the Parent or the Purchaser is a party or by which either of them or any of their respective properties or assets may be bound; or (c) violate any order, writ, injunction, decree, statute, rule, or regulation applicable to the Parent or the Purchaser or any of their respective properties or assets; except such violations, conflicts, breaches, defaults, terminations, or accelerations referred to in this SECTION 4.3 as are not, individually or in the aggregate, reasonably expected to result in a Parent Material Adverse Effect. 4.4 NO PRIOR ACTIVITIES. Except for obligations or liabilities incurred in connection with its incorporation or organization, the Offer, or the negotiation and consummation of this -18- Agreement and the transactions contemplated by this Agreement, the Purchaser has not incurred any obligations or liabilities, nor has it engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. 4.5 INFORMATION SUPPLIED. None of the information supplied or to be supplied by the Parent or the Purchaser for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9, the information statement under Section 14(f) of the Exchange Act, or the Proxy Statement will, in the case of the Offer Documents and the Schedule 14D-9, at the respective times the Offer Documents and the Schedule 14D-9 are filed with the SEC or first published, sent, or given to the stockholders of the Company, or, in the case of the Proxy Statement, at the date the Proxy Statement is first mailed to the stockholders of the Company or at the time of the meeting of the stockholders of the Company held to vote on approval and adoption of this Agreement and the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder, except that no representation or warranty is made by the Parent or the Purchaser with respect to statements made or incorporated by reference in the Offer Documents based on information supplied by the Company for inclusion or incorporation by reference in the Offer Documents. 4.6 FINANCING. Parent or Purchaser will have available to it at the time required the funds necessary to consummate the Offer, the Merger and the transactions contemplated hereby. ARTICLE V COVENANTS 5.1 CONDUCT OF BUSINESS OF THE COMPANY. (a) Except as expressly contemplated by this Agreement and except in cases where, at or after such time as the designees of the Parent constitute a majority of the members of the Board of Directors of the Company and the failure to comply with the covenants set forth in this SECTION 5.1 results from actions, or omissions to act, taken or authorized by such designees, during the period from the date of this Agreement to the Effective Time: (i) Each of the Company and its subsidiaries will conduct its business solely in the ordinary course consistent with past practices, except as is reasonably expected to facilitate the consummation of the Offer, the Merger or the transactions contemplated hereby. (ii) Neither the Company nor any of its subsidiaries will intentionally take or willfully omit to take any actions that results in or are reasonably expected to result in, a Company Material Adverse Effect. (iii) The Company will use its reasonable best efforts to preserve intact the business organization of the Company and each of its subsidiaries, to keep available the -19- services of its and their present officers and key employees and consultants, and to maintain satisfactory relationships with customers, agents, reinsurers, suppliers, and other persons having business relationships with the Company or its subsidiaries. (b) Without limiting the provisions of SECTION 5.1(a), except as expressly contemplated by this Agreement and except in cases where, at or after such time as the designees of the Parent constitute a majority of the members of the Board of Directors of the Company and the failure to comply with the covenants set forth in this SECTION 5.1 results from actions, or omissions to act, taken or authorized by such designees, during the period from the date of this Agreement to the Effective Time, neither the Company nor any of its subsidiaries will: (i) issue, sell, or dispose of additional shares of capital stock of any class (including the Shares) of the Company or any of its subsidiaries, or securities convertible into or exchangeable for any such shares or securities, or any rights, warrants, or options to acquire any such shares or securities, other than Shares issued upon exercise of options disclosed in SECTION 3.3, which options cover a total of no more than 3,328,989 Shares; (ii) redeem, purchase, or otherwise acquire, or propose to redeem, purchase, or otherwise acquire, any of its outstanding capital stock, or other securities of the Company or any of its subsidiaries; (iii) split, combine, subdivide, or reclassify any of its capital stock or declare, set aside, make, or pay any dividend or distribution on any shares of its capital stock except for dividends or distributions to the Company and its subsidiaries from their respective subsidiaries; (iv) sell, pledge, dispose of, or encumber any of its assets, except for sales, pledges, dispositions, or encumbrances in the ordinary course of business consistent with past practices or between the Company and its subsidiaries, except as reasonably may be expected to facilitate the consummation of the Offer, the Merger or the transactions contemplated hereby; (v) incur or modify any indebtedness or issue any debt securities, or assume, guarantee, endorse, or otherwise as an accommodation become absolutely or contingently responsible for obligations of any other person, or make any loans or advances, other than in the ordinary course of business consistent with past practices; (vi) adopt or amend any bonus, profit sharing, compensation, severance, termination, stock option, pension, retirement, deferred compensation, employment or other employee benefit agreements, trusts, plans, funds, or other arrangements for the benefit or welfare of any director, officer, or employee, or (except for normal increases in the ordinary course of business that are consistent with past practices and that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company) increase in any manner the compensation or fringe benefits of any director, officer, or employee or pay any benefit not required by any existing plan or arrangement (including, without limitation, the granting or vesting of stock options or stock appreciation rights) or take any action or grant any benefit not expressly -20- required under the terms of any existing agreements, trusts, plans, funds, or other such arrangements or enter into any contract, agreement, commitment, or arrangement to do any of the foregoing; or make or agree to make any payments to any directors, officers, agents, contractors, or employees relating to a change or potential change in control of the Company; (vii) acquire by merger, consolidation, or acquisition of stock or assets any corporation, partnership, or other business organization or division or make any investment either by purchase of stock or securities, contributions to capital (other than to wholly-owned subsidiaries), property transfer, or purchase of any material amount of property or assets, in any other person; (viii) except as required by this Agreement, adopt any amendments to their respective charters or bylaws or equivalent organizational documents; (ix) take any action other than in the ordinary course of business and consistent with past practices, to pay, discharge, settle, or satisfy any claim, liability, or obligation (absolute or contingent, accrued or unaccrued, asserted or unasserted, or otherwise); (x) change any method of accounting or accounting practice used by the Company or any of its subsidiaries, except for any change required by reason of a concurrent change in generally accepted accounting principles; (xi) revalue in any respect any of its assets, including, without limitation, writing down the value of its portfolio or writing off notes or accounts receivable other than in the ordinary course of business consistent with past practices (other than with respect to MatriDigm Corporation); (xii) except in the ordinary course of business consistent with past practice, authorize any new capital expenditures; (xiii) make any tax election, settle or compromise any federal, state, or local tax liability or consent to the extension of time for the assessment or collection of any federal, state, or local tax, the effect of which would be material; (xiv) settle or compromise any pending or threatened suit, action, or claim material to the Company and its subsidiaries taken as a whole or relevant to the transactions contemplated by this Agreement; (xv) except as permitted by this Agreement, enter into any agreement, arrangement, or understanding to do any of the foregoing actions in this SECTION 5.1, including any agreement, arrangement, or understanding resulting in or providing for a sale of any assets of the Company (other than a sale of assets in the ordinary course of business and consistent with past practices) or a merger or other liquidation, sale, or disposition of the Company; or -21- (xvi) voluntarily take any action or willfully omit to take any action that is reasonably expected to make any representation or warranty in ARTICLE III untrue or incorrect in any material respect at any time, including as of the date of this Agreement and as of the time of consummation of the Offer and the Effective Time, as if made as of such time. 5.2 PROXY STATEMENT. Promptly after the execution of this Agreement, the Company and the Parent will cooperate with each other and use all reasonable efforts to prepare, and the Company and the Parent will file with the SEC, as soon as is reasonably practicable after completion of the Offer, a proxy statement, together with a form of proxy, or information statement, with respect to the Special Meeting (as defined in SECTION 5.3), if such Special Meeting is required to be held pursuant to SECTION 5.3. For the purposes of this Agreement, the term "PROXY STATEMENT" means such proxy or information statement filed in final form with the SEC at the time it initially is mailed to the stockholders of the Company and all amendments or supplements thereto, if any, similarly filed and mailed. The parties will use all reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as practicable after filing and, as promptly as practicable after the Proxy Statement has been so cleared, will mail the Proxy Statement to the stockholders of the Company as of the record date for the Special Meeting. The Company represents that none of the information provided or to be provided by it, and the Parent and the Purchaser represent that none of the information provided or to be provided by them, for use in the Proxy Statement will, on the date the Proxy Statement is first mailed to the stockholders of the Company and on the date of the Special Meeting, be false or misleading with respect to any material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, and the Parent, the Company, and the Purchaser each agrees to correct any information provided by it for use in the Proxy Statement that has become false or misleading in any material respect and file such amendments and supplements as are necessary. The Proxy Statement will comply as to form in all material respects with all applicable requirements of federal securities laws and applicable state laws. 5.3 ACTION OF STOCKHOLDERS OF THE COMPANY; VOTING AND DISPOSITION OF THE SHARES. (a) Promptly after completion of the Offer and if required by applicable law in order to consummate the Merger, the Company will take all action necessary in accordance with the DGCL and the Certificate of Incorporation and Bylaws of the Company, to call a meeting of its stockholders (the "SPECIAL MEETING") with a record date as of which the Parent is the record owner of the Shares purchased pursuant to the Offer at which the stockholders of the Company will consider and vote upon the Merger and this Agreement. Unless the fiduciary duties of the Board of Directors or any Director under applicable law require otherwise, the Proxy Statement will contain the unanimous recommendation of the Board of Directors of the Company that the stockholders of the Company vote to adopt and approve the Merger and this Agreement. The Company will, at the request of the Parent, use all reasonable efforts to obtain from its stockholders proxies in favor of such adoption and approval and to take all other action necessary, or, in the reasonable judgment of the Company and the Parent, helpful to secure the vote or consent of stockholders required by the DGCL to effect the Merger. Notwithstanding the foregoing, in the event that the Parent determines to effect the Merger without a meeting of the -22- stockholders of the Company pursuant to Section 228 or Section 253 of the DGCL, the parties will take all necessary or appropriate action to cause the Merger to become effective as soon as practicable after expiration of the Offer without a meeting of stockholders, in accordance with either such section of the DGCL. (b) At the Special Meeting, the Parent, the Purchaser, and their subsidiaries will vote, or cause to be voted, all of the Shares then owned by any of them in favor of the Merger. 5.4 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this Agreement and to the fiduciary obligations of the Board of Directors of the Company under applicable law, each of the parties agrees to use their respective reasonable best efforts to take, or cause to be taken, all actions to do, or cause to be done, all things necessary, proper, or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement (including consummation of the Offer, the Merger, and the Financing (as defined in SECTION 5.11)) and to cooperate with each other in connection with the foregoing, including, without limitation, using their respective reasonable best efforts (a) to obtain all necessary waivers, consents, and approvals from other parties to loan agreements, leases, and other contracts, (b) to obtain all necessary consents, approvals, and authorizations as are required to be obtained under any federal, state, or foreign law or regulations, (c) to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement, (d) to prepare and effect all necessary registrations and filings, and (e) to fulfill all conditions to and covenants contained in this Agreement. If, after the Effective Time, any action is necessary to effect the purposes of this Agreement, the proper officers and directors of each party will take all such necessary action. 5.5 NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt notice to the Parent and the Purchaser, and the Parent and the Purchaser will give prompt notice to the Company, of (a) the occurrence, or failure to occur, of any event, which occurrence or failure is reasonably expected to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time, (b) any material failure of the Company, the Parent, or the Purchaser, as the case may be, or of any officer, director, employee, or agent of the Company, the Parent, or the Purchaser, to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by it under this Agreement, (c) any act, omission to act, event, or occurrence that, with notice, the passage of time, or otherwise, is reasonably expected to result in a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be, and (d) any contingent liability of the Company for which it reasonably believes it will, with the passage of time or otherwise, become liable. No such notification will affect the representations or warranties of the parties or the conditions to the obligations of the parties under this Agreement. 5.6 ACCESS TO INFORMATION. (a) From the date of this Agreement to the Effective Time, the Company will, and will cause its subsidiaries, officers, directors, employees, and agents upon reasonable notice -23- to, afford to officers, employees, and agents of the Parent, the Purchaser and their affiliates and, subject to the execution and delivery of a customary confidentiality agreement, the banks, other financial institutions, and investment bankers working with the Parent or the Purchaser, and their respective officers, employees, and agents, complete access at all reasonable times to its officers, employees, agents, properties, books, records, and contracts, and will furnish the Parent, the Purchaser and their affiliates and, subject to the execution and delivery of a customary confidentiality agreement, the banks, other financial institutions, and investments bankers working with the Parent or the Purchaser, all financial, operating, and other data and information as they reasonably request. (b) Each of the Parent and the Purchaser will hold and will cause its directors, officers, agents, employees, consultants, and advisors to hold in confidence, unless compelled to disclose by judicial or administrative process or, in the written opinion of its legal counsel, by other requirements of law, all documents and information concerning the Company and its subsidiaries furnished to such persons in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (i) previously known by such persons from sources other than the Company, or its directors, officers, representatives, or affiliates, (ii) in the public domain through no fault of such persons, or (iii) later lawfully acquired by such persons on a non-confidential basis from other sources who are not known by the Parent or the Purchaser to be bound by a confidentiality agreement or otherwise prohibited from transmitting the information to the Parent or the Purchaser by a contractual, legal, or fiduciary obligation) and will not release or disclose such information to any other person, except its directors, officers, agents, employees, consultants, and advisors, in connection with this Agreement who need to know such information. If the transactions contemplated by this Agreement are not consummated, such confidence shall be maintained and, if requested by or on behalf of the Company, the Parent and the Purchaser will, and will use all reasonable efforts to cause their auditors, attorneys, financial advisors, and other consultants, agents, and representatives to, return to the Company or destroy all copies of written information furnished by the Company to the Parent and the Purchaser or their agents, representatives, or advisors. It is understood that the Parent and the Purchaser will be deemed to have satisfied their obligation to hold such information confidential if they exercise the same care as they take to preserve confidentiality for their own similar information. (c) Within ten (10) days following the date hereof, the Company will deliver or cause to be delivered to Purchaser and Parent copies of and any relevant information relating to, and SCHEDULE 5.6(c) setting forth, the following: (i) registered patents, trademarks, service marks, trade names or copyrights, or applications for or licenses (to or from the Company or any of its subsidiaries) with respect to any of the foregoing that are material to the Company and its subsidiaries taken as a whole, that (A) are owned by the Company or any of its subsidiaries, or with respect to which the Company or any of its subsidiaries has any rights, or (B) are used, whether directly or indirectly, by the Company or any of its subsidiaries, and (ii) all Pension Plans and Benefit Plans. (d) If the Parent and the Purchaser obtain actual knowledge that the Company is in breach of any representation or warranty contained in this Agreement, the Parent and the -24- Purchase will promptly inform the Company of such breach. However, no investigation pursuant to this SECTION 5.6 will affect any representations or warranties of the parties in this Agreement or the conditions to the obligations of the parties to this Agreement. 5.7 PUBLIC ANNOUNCEMENTS. The Parent and the Purchaser on the one hand and the Company on the other hand will consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement, the Offer, or the other transactions contemplated by this Agreement, and will not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or the listing requirements of any securities exchange. 5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION. (a) The Parent and the Purchaser agree that all rights to indemnification now existing in favor of the directors or officers of the Company and its subsidiaries as provided in their respective certificates of incorporation or bylaws and pursuant to the contracts listed on SCHEDULE 5.8 will, to the extent such rights are in accordance with applicable law, survive the Merger and stay in effect in accordance with their respective terms. Parent hereby guarantees the full and faithful performance by Parent, Purchaser and the Surviving Corporation of their respective obligations set forth in this SECTION 5.8(a). (b) In the event any action, suit, proceeding, or investigation relating to this Agreement or to the transactions contemplated by this Agreement is commenced by a third party, whether before or after the Effective Time, the parties to this Agreement agree, subject to the fiduciary duties of the respective Directors of the Company and Parent, to cooperate and use all reasonable efforts to defend against and respond to such action, suit, proceeding, or investigation. (c) For a period of three (3) years after the Effective Time, Parent shall cause the Surviving Corporation to maintain officers' and directors' liability insurance for all persons currently covered under the Company's officers' and directors' liability insurance policies, in their capacities as officers and directors, on terms no less favorable to the covered persons than such existing insurance; provided, however, that Parent shall not be required in order to maintain or procure such coverage to pay an annual premium in excess of 200% of the current annual premium paid by the Company for its existing coverage (the "Cap"); and provided, further, that if equivalent coverage cannot be obtained, or can be obtained only by paying an annual premium in excess of the Cap, Parent shall only be required to obtain as much coverage as can be obtained by paying an annual premium equal to the Cap. This SECTION 5.8(c) is intended to be for the benefit of, and shall be enforceable by, the persons referred to above, their heirs and personal representatives, and shall be binding on Parent and its successors and assigns. (d) The covenants contained in this SECTION 5.8 will survive the Merger and the Termination of this Agreement as a result thereof, indefinitely. 5.9 OTHER ACTIONS BY THE COMPANY. If any "fair price," "moratorium," "control share acquisition," or other form of antitakeover statute, regulation, charter provision, or contract is or -25- becomes applicable to the transactions contemplated by this Agreement, the Company and the members of the Board of Directors of the Company will use their reasonable efforts to grant such approvals and take such actions as are necessary under such laws, provisions, or contracts so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise act to eliminate or minimize the effects of such statute, regulation, provision or contract on the transactions contemplated by this Agreement. 5.10 AVAILABLE FUNDS. The Parent will at the times required have financing that, together with internally generated or otherwise available funds and Parent's current revolving credit agreement will be sufficient to permit the Purchaser to consummate the Offer and the Merger (the "FINANCING"). The Parent and the Purchaser will use their reasonable best efforts to pursue and obtain the Financing as soon as practicable. ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER The respective obligations of each party to effect the Merger are subject to the satisfaction prior to the Effective Time of the following conditions: 6.1 STOCKHOLDER APPROVAL. This Agreement will have been adopted and approved by the affirmative vote of the stockholders of the Company in accordance with the Certificate of Incorporation and Bylaws of the Company and with applicable law, unless no stockholder vote is required by law. 6.2 NO INJUNCTION. No federal or state statute, rule, regulation, injunction, decree, or order will be enacted, promulgated, entered, or enforced that would (i) prohibit consummation of the Merger or of the other transactions contemplated by this Agreement or (ii) impose any material limitation on the ability of the Parent or the Purchaser to exercise all rights of ownership with respect to the Shares; provided that the parties to this Agreement agree to use their respective reasonable best efforts to have any such injunction, decree, or order lifted. 6.3 OFFER. The Purchaser will have purchased Shares pursuant to the Offer (except that the Purchaser or the Parent in their sole discretion may waive conditions to the Offer). 6.4 GOVERNMENTAL CONSENTS. The waiting period applicable to the consummation of the Merger under the HSR Act will have expired or been terminated and all filings required to be made prior to the Effective Time with, and all consents, approvals, permits, and authorizations required to be obtained prior to the Effective Time from, governmental and regulatory authorities in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement will have been made or obtained (as the case may be). -26- ARTICLE VII TERMINATION; AMENDMENT; WAIVER 7.1 TERMINATION. This Agreement may be terminated and the Offer and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any Stockholder approval of the Merger): (a) by mutual written consent of the Parent, the Purchaser, and the Company (subject to the provisions of SECTION 1.3(b)); (b) by the Parent and the Purchaser or the Company if any court of competent jurisdiction or other governmental body has issued a final order, decree, or ruling or taken any other final action restraining, enjoining, or otherwise prohibiting the Merger and such order, decree, ruling, or other action is or has become nonappealable; (c) by the Parent and the Purchaser if due to an occurrence or circumstance that has resulted or is reasonably expected to result in a failure to satisfy any of the conditions set forth in ANNEX A, the Purchaser has (i) failed to commence the Offer within five business days following the date of the initial public announcement of the Offer, (ii) terminated the Offer, or (iii) failed to pay for the Shares pursuant to the Offer by January 31, 1999; (d) by the Company if (i) there has not been a breach of any material representation, warranty, covenant, or agreement on the part of the Company, and the Purchaser has (A) failed to commence the Offer within five business days following the date of the initial public announcement of the Offer, (B) terminated the Offer, or (C) failed to pay for the Shares pursuant to the Offer by January 31, 1999; provided, that any termination pursuant to this CLAUSE (C) must be made by written notice irrevocably stating the intent of the Company to terminate this Agreement under this SECTION 7.1(d)(i)(C) delivered to the Purchaser and the Parent by 12:00 noon, Dallas time, on January 31, 1999, or (ii) prior to the purchase of Shares pursuant to the Offer, a person or group has made a bona fide offer that the Board of Directors of the Company by a majority vote determines in its good faith judgment and in the exercise of its fiduciary duties, after consultation with its financial and legal advisors, is obligated by its fiduciary duties under applicable law to terminate this Agreement, provided that such termination under this CLAUSE (ii) will not be effective until payment of the fee required by SECTION 7.3(b); (e) by the Parent and the Purchaser prior to the purchase of Shares pursuant to the Offer, if: (i) there has been a breach (which breach is not cured or not capable of being cured prior to the earlier of (A) 10 days following notice to the Company by the Purchaser of such breach or (B) two business days prior to the expiration date of the Offer, as extended from time to time pursuant to the terms of this Agreement) of any representation or warranty on the part of the Company (a) having a Company Material Adverse Effect or (b) such that closing would put the Purchaser or the Parent in conflict with the federal securities law; -27- (ii) there has been a breach (which breach is not cured or not capable of being cured prior to the earlier of (A) 10 days following notice to the Company by the Purchaser of such breach or (B) two business days prior to the expiration date of the Offer, as extended from time to time pursuant to the terms of this Agreement) of any covenant or agreement on the part of the Company (a) resulting in a Company Material Adverse Effect or (b) such that closing would put the Purchaser or the Parent in conflict with the federal securities law; (iii) the Company engages in negotiations with any person or group (other than the Parent or the Purchaser) that has proposed a Third Party Acquisition (as defined in SECTION 7.3) except to the extent permitted by SECTION 8.8; (iv) the Company enters into an agreement, letter of intent, or arrangement with respect to a Third Party Acquisition; (v) the Board has withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its approval or recommendation of the Offer, this Agreement, or the Merger or has recommended another offer, or has adopted any resolution to effect any of the foregoing; or (vi) the Minimum Conditions have not been satisfied by the expiration date of the Offer and on or prior to such date (A) any person or group (other than the Parent or the Purchaser) has made and not withdrawn a public announcement with respect to a Third Party Acquisition or (B) any person or group (including the Company or any of its affiliates) other than the Parent or the Purchaser has become the beneficial owner of 19.9% (except in bona fide arbitrage transactions) or more of the Shares; or (f) by the Company if (i) there has been a breach (which breach is not cured or not capable of being cured prior to the earlier of (A) 10 days following notice to Parent of such breach or (B) two business days prior to the expiration date of the Offer, as extended from time to time pursuant to the terms of this Agreement) of any representation or warranty on the part of the Parent or the Purchaser that materially adversely affects (or materially delays) the consummation of the Offer or (ii) there has been a material breach (which breach is not cured or not capable of being cured prior to the earlier of (A) 10 days following notice to Parent of such breach or (B) two business days prior to the expiration date of the Offer, as extended from time to time pursuant to the terms of this Agreement) of any covenant or agreement on the part of the Parent or the Purchaser that materially adversely affects (or materially delays) the consummation of the Offer. 7.2 EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to SECTION 7.1, this Agreement will become void and have no effect, without any liability on the part of any party to this Agreement or its affiliates, directors, officers, or stockholders, other than the provisions of this SECTION 7.2 and SECTIONS 5.6(b), 5.8, and 7.3. Nothing contained in this SECTION 7.2 will relieve any party from liability for any breach of this Agreement. -28- 7.3 FEES AND EXPENSES. (a) In the event the Parent and the Purchaser terminate this Agreement pursuant to SECTIONS 7.1(e)(i) through (v) or the Company terminates this Agreement pursuant to SECTION 7.1(d)(ii) or SECTION 7.1(d)(i)(C), the Company will reimburse the Parent, the Purchaser, and their affiliates (not later than one business day after submission of statements together with reasonable documentation therefor) for all out-of-pocket fees and expenses actually incurred by any of them or on their behalf in connection with the Offer and the Merger and the proposed consummation of all transactions contemplated by this Agreement (including, without limitation, costs of advertising, filing fees and fees payable to legal counsel, financial printers, financing sources, investment bankers, counsel to any of the foregoing, and accountants) not in excess of $3,000,000. (b) If (i) (A) the Parent and the Purchaser terminate this Agreement pursuant to SECTIONS 7.1(e)(i) through (v) or in circumstances that would permit the Parent and the Purchaser to terminate this Agreement pursuant to SECTIONS 7.1(e)(i) through (v) had a notice of termination specified such SECTIONS 7.1(e)(i) through (v) or (B) if the Company terminates this Agreement pursuant to SECTION 7.1(d)(i)(C) and, within four months after such termination pursuant to clause (A) or clause (B) the Company enters into an agreement, letter of intent, or binding arrangement with respect to a Third Party Acquisition, or a Third Party Acquisition occurs (or within 9 months after such termination if the Third Party Acquisition that occurs or with respect to which an agreement, letter of intent or binding arrangement has been entered into is or is reasonably expected to be a transaction more favorable to the Company's stockholders than the transactions contemplated by this Agreement) or (ii) the Company terminates this Agreement pursuant to SECTION 7.1(d)(ii), then in either case the Company will pay to the Parent and the Purchaser, within one business day following the execution and delivery of such agreement or letter of intent or the entering into of such an arrangement or the occurrence of such Third Party Acquisition, as the case may be, or simultaneously with such termination pursuant to SECTION 7.1(d)(ii), a fee, in cash, of $10,000,000 and reimburse Parent for all out-of-pocket fees and expenses actually incurred by or on behalf of Parent or Purchaser in connection with the Offer and the Merger and the proposed consummation of all the transactions contemplated by this Agreement (including, without limitation, costs of advertising, filing fees and fees payable to legal counsel, financial printers, financing sources, investment bankers, counsel to any of the foregoing, and accountants) not in excess of $3,000,000 (with a credit for amounts, if any, paid under SECTION 7.3(a)). For the purposes of this Agreement, "THIRD PARTY ACQUISITION" means the occurrence of any of the following events (i) the acquisition of the Company by merger or otherwise by any person or group other than the Parent, the Purchaser, or any affiliate of the Parent or the Purchaser (a "THIRD PARTY"); (ii) the acquisition by a Third Party of more than 19.9% of the total assets of the Company and its subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 19.9% or more of the outstanding Shares from the Company or in a transaction or series of related transactions that results in a change of control of the Company; (iv) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (v) the acquisition by the Company or any of its subsidiaries of more than 19.9% of the outstanding Shares. -29- (c) Except as specifically provided in this SECTION 7.3 each party will bear its own expenses in connection with this Agreement and the transactions contemplated by this Agreement. 7.4 AMENDMENT. This Agreement may not be amended except in an instrument in writing signed on behalf of all of the parties to this Agreement; PROVIDED, HOWEVER, that after approval of the Merger by the stockholders of the Company, no amendment that would either decrease the Merger Consideration or change any other term or condition of this Agreement, if any such change, alone or in the aggregate, would materially and adversely affect the stockholders of the Company, may be made without the further approval of the stockholders of the Company; PROVIDED, FURTHER, that, after purchase of the Shares pursuant to the Offer, no amendment may be made to SECTION 5.8 without the consent of the indemnified persons. 7.5 WAIVER. At any time prior to the Effective Time, whether before or after the Special Meeting, any party to this Agreement may (i) subject to the second proviso in SECTION 7.4, extend the time for the performance of any of the obligations or other acts of any other party or parties to this Agreement, (ii) subject to the provisos contained in SECTION 7.4 of this Agreement, waive any inaccuracies in the representations and warranties contained in this Agreement by any other applicable party or in any documents, certificate, or writing delivered pursuant to this Agreement by any other applicable party, or (iii) subject to the provisos contained in SECTION 7.4 of this Agreement, waive compliance with any of the agreements of any other party or with any conditions to its own obligations. Any agreement on the part of a party to this Agreement to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party by a duly authorized officer. ARTICLE VIII MISCELLANEOUS 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. The representations and warranties made in this Agreement will not survive beyond the Effective Time or the termination of this Agreement, as the case may be. No investigation made, or information received by, any party to this Agreement will affect any representation or warranty made by any other party to this Agreement. The covenants and agreements of the parties to this Agreement will survive in accordance with their terms. 8.2 BROKERAGE FEES AND COMMISSIONS. The Company hereby represents and warrants to the Parent with respect to the Company and any of its subsidiaries that, except for fees payable to Paul Stoffel (not to exceed $1.3 million) and fees payable to DLJ pursuant to an agreement described in the Offer, and except as disclosed in the Offer, the Parent and the Purchaser hereby represent and warrant to the Company with respect to Parent or any of its subsidiaries that, no person is entitled to receive from the Company, the Parent, the Purchaser or any of their subsidiaries, respectively, any investment banking, brokerage, or finder's fee or fees in connection with this Agreement or any of the transactions contemplated by this Agreement. -30- 8.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with the Stock Tender Agreements and all the Schedules and Annexes, (a) constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all other prior written agreements and understandings and all prior and contemporaneous oral agreements and understandings between the parties to this Agreement or any of them with respect to the subject matter of this Agreement and (b) will not be assigned by operation of law or otherwise, provided that the Parent may assign its rights and obligations under this Agreement, or those of the Purchaser, including, without limitation, the right to substitute in place of the Purchaser a subsidiary as one of the constituent corporations to the Merger as provided in SECTION 2.1 to any direct or indirect subsidiary of the Parent, but no such assignment will relieve the assigning party of its obligations under this Agreement. Any purported assignment of this Agreement not made in accordance with this SECTION 8.3 will be null, void, and of no effect. No party to this Agreement has relied upon any representation or warranty, oral or written, of any other party to this Agreement or any of their officers, directors, or stockholders except for the representations and warranties contained in this Agreement and the Stock Tender Agreements. 8.4 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect. Upon any final judicial determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties to this Agreement will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Agreement be consummated to the extent possible. 8.5 NOTICES. All notices, requests, claims, demands and other communications under this Agreement will be in writing and will be deemed to have been duly given when delivered in person, by cable, telegram or telex, facsimile or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: (a) if to the Parent or the Purchaser, to: Affiliated Computer Services, Inc. 2828 N. Haskell, 10th Floor Dallas, Texas 75204 Attention: Jeff A. Rich Fax: (214) 821-1014 and Affiliated Computer Services, Inc. 2828 N. Haskell, 10th Floor Dallas, Texas 75204 Attention: David Black Fax: (214) 823-5746 -31- with a copy to: Hughes & Luce, L.L.P. 1717 Main Street, Suite 2800 Dallas, Texas 75201 Attn: David G. Luther, Jr. Fax: (214) 939-6100 (b) if to the Company, to: BRC Holdings, Inc. 1111 W. Mockingbird Lane Suite 1400 Dallas, Texas 75247 Attention: Thomas A. Kiraly Fax: (214) 689-0317 with a copy to: Arter & Hadden LLP 1717 Main Street, Suite 4100 Dallas, Texas 75201 Attn: Jeffrey M. Sone Fax: (214) 741-7139 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address will be effective only upon receipt). 8.6 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. 8.7 SPECIFIC PERFORMANCE. Each of the parties to this Agreement acknowledges and agrees that the other parties to this Agreement would be irreparably damaged in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties to this Agreement agrees that each of them will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions of this Agreement in any action instituted in any court of the United States or any state having subject matter jurisdiction, in addition to any other remedy to which such party may be entitled, at law or in equity. -32- 8.8 OTHER POTENTIAL BIDDERS. (a) Subject to the next sentence, the Company shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or any of its subsidiaries, solicit or encourage (including by way of furnishing information) the initiation of any inquires or proposals regarding a Third Party Acquisition (any of the foregoing inquiries or proposals being referred to herein as an "Acquisition Proposal"). Notwithstanding the foregoing, nothing contained in this SECTION 8.8(a) or any other provision of this Agreement shall prevent the Board if it determines in good faith, after consultation with, and the receipt of advice from, outside counsel, that it is required to do so in order to discharge properly its fiduciary duties, from considering, negotiating, approving and recommending to the stockholders of the Company an unsolicited bona fide written Acquisition Proposal, or providing information to any third party in connection therewith, which the Board of Directors of the Company determines in good faith (after consultation with its financial advisors and legal counsel) may reasonably result in a transaction more favorable to the Company's stockholders than the transaction contemplated by this Agreement (any Acquisition Proposal meeting such criterion, including those specified in the immediately preceding parenthetical proviso, being referred to herein as a "SUPERIOR PROPOSAL"). Nothing therein shall prohibit the Company from complying with Rules 14d-9 and 14e-2 under the Exchange Act with respect to any other tender offers. (b) The Company shall promptly, but in no event later than 24 hours, notify Parent after receipt of any Acquisition Proposal or any request for nonpublic information relating to the Company or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be made orally and in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact. (c) If the Board receives a request for material nonpublic information by a party who makes an unsolicited bona fide Acquisition Proposal and the Board determines that such proposal, if consummated pursuant to its terms would be a Superior Proposal, then, and only in such case, the Company may, subject to the execution of a confidentiality agreement substantially similar to that then in effect between the Company and Parent, provide such party with access to information regarding the Company. (d) The Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any parties (other than the Parent and the Purchaser) conducted heretofore with respect to any of the foregoing. The Company agrees not to release any third party from any confidentiality or standstill agreement to which the Company is a party. (e) The Company shall ensure that the officers, directors and employees of the Company and its subsidiaries and any investment banker or other advisor or representative retained by the Company are aware of the restrictions described in this Section; and shall be responsible for any breach of this SECTION 8.8 by such bankers, advisors and representatives. -33- 8.9 DESCRIPTIVE HEADINGS; REFERENCES. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. References in this Agreement to Sections, Annexes, and Schedules are references to the Sections, Annexes, and Schedules of this Agreement unless the context indicates otherwise. 8.10 PARTIES IN INTEREST. This Agreement will be binding upon and inure solely to the benefit of each party to this Agreement, and, except as provided in SECTIONS 5.9 and 8.11, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 8.11 BENEFICIARIES. The Parent hereby acknowledges that SECTION 5.8 is intended to benefit the indemnified parties referred to in SECTION 5.8, any of whom will be entitled to enforce SECTION 5.8 against the Surviving Corporation, the Parent or the Company, as the case may be. 8.12 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which will constitute one and the same agreement. 8.13 OBLIGATIONS. The Parent will perform or cause the Purchaser to perform all of the obligations of the Purchaser under this Agreement, including consummation of the Merger, in accordance with the terms of this Agreement. 8.14 CERTAIN DEFINITIONS. For the purposes of this Agreement: (a) the term "SUBSIDIARY" means each person in which a person owns or controls, directly or through one or more subsidiaries, 50 percent or more of the stock or other interests having general voting power in the election of directors or persons performing similar functions or more than 50% of the equity interests; (b) the term "PERSON" will be broadly construed to include any individual, corporation, company, partnership, trust, joint stock company, association, or other private or governmental entity; (c) the term "GROUP" has the meaning given in Section 13(d)(3) of the Exchange Act; (d) the term "AFFILIATE" has the meaning given in Rule 144(a)(1) under the Securities Act; and (e) the term "BUSINESS DAY" has the meaning given in Rule 14d-1(c)(6) under the Exchange Act. -34- IN WITNESS WHEREOF, each of the parties to this Agreement has caused this Agreement to be executed on its behalf by its duly authorized officers, all as of the day and year first above written. AFFILIATED COMPUTER SERVICES, INC. By: /s/ Mark A. King ---------------------------------- Name: Mark A. King Title: Executive Vice President, Chief Financial Officer ACS ACQUISITION CORPORATION By: /s/ Mark A. King ---------------------------------- Name: Mark A. King Title: Vice President BRC HOLDINGS, INC. By: /s/ Jerrold L. Morrison ---------------------------------- Name: Jerrold L. Morrison Title: President and Chief Operating Officer -35- ANNEX A Terms used in this Annex A have the meanings ascribed to them in the Agreement and Plan of Merger dated as of October 19, 1998 (the "MERGER AGREEMENT"). Notwithstanding any other provisions of the Offer, the Purchaser will not be required to accept for payment or (subject to any applicable rules and regulations of the SEC, including Rule 14e-l(c) relating to the obligation of the Purchaser to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer) to pay for tendered Shares, or may terminate or amend the Offer as provided in the Agreement, or may postpone the acceptance for payment of, or payment for, Shares (whether or not any other Shares have been accepted for payment or paid for pursuant to the Offer) if prior to the expiration of the Offer (i) the Minimum Condition has not been satisfied; (ii) the waiting period under the HSR Act has not expired or been terminated with respect to purchase of the Shares; or (iii) if at any time on or after the date of the Merger Agreement, and at any time before the time of acceptance for payment of any such Shares, any of the following occurs: (a) any of the representations or warranties of the Company contained in the Merger Agreement is not true and correct at and as of any date prior to the expiration date of the Offer as if made at and as of such time, except for (i) failures (other than with respect to the Company's investment in MatriDigm) to be true and correct as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect; or (ii) failures to comply as are capable of being and are cured prior to the earlier of (A) 10 days after written notice from the Purchaser to the Company of such failure or (B) two business days prior to the expiration date of the Offer; (b) the Company has failed to comply with any of its obligations under the Merger Agreement, except for(i) failures to so comply as are not, individually or in the aggregate, reasonably expected to result in a Company Material Adverse Effect; and (ii) failures to comply as are capable of being and are cured prior to the earlier of (A) 10 days after written notice from the Purchaser to the Company of such failure or (B) two business days prior to the expiration date of the Offer; (c) the Board of Directors of the Company has withdrawn or modified in any respect adverse to the Purchaser or the Parent its recommendation of the Offer or taken any position inconsistent with such, recommendation; (d) the Merger Agreement has been terminated in accordance with its terms; (e) the Company has reached an agreement with the Parent or the Purchaser that the Offer or the Merger be terminated or amended; (f) any state, federal, or foreign government, or governmental authority has taken any action, or proposed, sought, promulgated, or enacted, or any state, federal, or A-1 foreign government or governmental authority or court has entered, enforced, or deemed applicable to the Offer or the Merger, any statute, rule, regulation, judgment, order, or injunction that is reasonably likely to (i) make the acceptance for payment of, the payment for, or the purchase of, some or all of the Shares illegal or otherwise restrict, materially delay, prohibit consummation of, or make materially more costly, the Offer or the Merger, (ii) result in a material delay in or restrict the ability of the Purchaser, or render the Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares in the Offer or the Merger, (iii) require the divestiture by the Parent, the Purchaser, or the Company or any of their respective subsidiaries or affiliates of all or any material portion of the business, assets, or property of any of them or any Shares, or impose any material limitation on the ability of any of them to conduct their business and own such assets, properties, and Shares, (iv) impose material limitations on the ability of the Parent or the Purchaser to acquire or hold or to exercise effectively all rights of ownership of the Shares, including the right to vote any Shares acquired by either of them on all matters properly presented to the Stockholders of the Company,(v) impose any limitations on the ability of the Parent, the Purchaser, or any of their respective subsidiaries or affiliates effectively to control in any material respect the business or operations of the Company, the Parent, the Purchaser, or any of their respective subsidiaries or affiliates; (g) any change (or any condition, event or development involving a prospective change) has occurred or been threatened in the business, properties, assets, liabilities, capitalization, stockholders' equity, financial condition, operations, licenses or franchises results of operations, or prospects of the Company or any of its subsidiaries, that is reasonably expected to result in a Company Material Adverse Effect; (h) there has occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market or quotations for shares traded thereon as reported by the NASDAQ or otherwise, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or (whether or not mandatory), (iii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States other than as a participant in police actions sponsored by international organizations, (iv) any limitation (whether or not mandatory) by any governmental authority on the extension of credit by banks or other financial institutions, (v) after the date of the Merger Agreement, an aggregate decline of at least 25% in the Dow Jones Industrial Average or Standard & Poor's 500 Index or a decline in either such index of 12-1/2% in any 24-hour period, or (vi) in the case of any of the occurrences referred to in clauses (i) through (iv) existing at the time of the commencement of the Offer, in the reasonable judgment of the Purchaser, a material acceleration or worsening thereof; (i) any person or group other than the Parent or the Purchaser and their affiliates has entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation, or other business combination or acquisition with or involving the Company or any of its subsidiaries; or A-2 (j) any material approval, permit, authorization, consent, or waiting period of any domestic or foreign, governmental, administrative, or regulatory entity.(federal, state, local, provincial or otherwise) has not been obtained or satisfied on terms satisfactory to the Purchaser in its sole discretion that, in the good faith judgment of the Purchaser, makes it inadvisable to proceed with the Offer or with such acceptance for payment of, or payment for, Shares or to proceed with the Merger. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances giving rise to any such condition or may be waived by the Purchaser in whole or in part at any time and from time to time in its sole discretion (subject to the terms of the Agreement). The failure by the Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed to waiver with respect to any other facts or circumstances, and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. A-3 ANNEX B-1 Kathy Ayres Esping, individually and as Independent Executor of the Estate of P.E. Esping and as Director of the Esping Family Foundation, Inc. Paul Stoffel B1-1 ANNEX B-2 STOCK TENDER AGREEMENT STOCK TENDER AGREEMENT (this "Agreement"), dated October 19, 1998, by and among AFFILIATED COMPUTER SERVICES, INC., a Delaware corporation ("Parent"), ACS ACQUISITION CORPORATION, a Delaware corporation and wholly-owned subsidiary of the Parent ("Purchaser") and each of the parties listed on the signature pages hereto (each a "Stockholder", and collectively, the "Stockholders"). WHEREAS, each of the Stockholders is, as of the date hereof, the record and beneficial owner of the shares of common stock, par value $.01 per share (the "Common Stock"), of BRC HOLDINGS, INC., a Delaware corporation (the "Company"), set forth opposite its name on Annex I hereto; WHEREAS, Parent, Purchaser and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides, among other things, for the acquisition of the Company by Parent by means of a cash tender offer (the "Offer") by Purchaser for all of the outstanding shares of Common Stock and for the subsequent merger (the "Merger") of Purchaser with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent and Purchaser to enter into the Merger Agreement, and in order to induce Parent and Purchaser to enter into the Merger Agreement, the Stockholders have agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the execution and delivery by Parent and Purchaser of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Each of the Stockholders hereby represents and warrants to Parent and Purchaser, severally and not jointly, as follows: (a) Such Stockholder is the beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") set forth opposite its name on Annex I to this Agreement. Such Shares are held of record, in each case, by the custodian of such Stockholder. On the date hereof, the Shares opposite such Stockholder's name constitute all of the Shares owned by such Stockholder. Such Stockholder has the exclusive right to vote or dispose of (or exercise the voting or disposition of) such Shares. (b) Such Stockholder has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all action necessary to authorize the execution, delivery and performance of this Agreement. 1 (c) This Agreement has been duly authorized, validly executed and delivered by such Stockholder and constitutes the legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) The execution and delivery of this Agreement by such Stockholder do not, and the performance by such Stockholder of its obligations hereunder will not, require any filing by such Stockholder with, or any permit, authorization, consent or approval of, any Governmental or Regulatory Authority or any third party other than an amendment to Schedule 13D and Form 4 and/or Form 5. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Stockholder is a trustee whose consent is required for the execution and delivery of this Agreement or the consummation by such Stockholder of the transactions contemplated hereby. (e) The Shares and the certificates representing the Shares owned by such Stockholder are now and at all times during the term hereof will be held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all Liens, proxies, voting trusts or agreements or understandings or arrangements whatsoever, except for any such liens or proxies arising hereunder, and not subject to any preemptive rights. SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER. Each of Parent and Purchaser hereby represents and warrants to the Stockholders as follows: (a) Parent and Purchaser are corporations duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation, and each of Parent and Purchaser has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by each of Parent and Purchaser and constitutes the legal, valid and binding obligation of each of Parent and Purchaser, enforceable against each of them in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The execution and delivery of this Agreement by Parent and Purchaser do not, and the performance by Parent and Purchaser of their obligations hereunder and the consummation of the transactions contemplated hereby will not, (i) conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, result in or give to any person any right of termination, cancellation, modification or acceleration of, or result in the creation or imposition of any Lien upon any of the assets or properties of Parent or Purchaser under, any of the terms, conditions or provisions of (A) the certificates or 2 articles of incorporation or bylaws of Parent or Purchaser or (B) (x) any Law or Order of any Governmental or Regulatory Authority applicable to Parent or Purchaser or any of their respective assets or properties, or (y) any Contract to which Parent or Purchaser is a party or by which Parent or Purchaser or any of their respective assets or properties is bound, excluding from the foregoing clauses (x) and (y) conflicts, violations, breaches, defaults, terminations, modifications, accelerations and creations and impositions of Liens which, individually or in the aggregate, could not be reasonably expected to have a material adverse effect on the ability of Parent and Purchaser to consummate the transactions contemplated by this Agreement, or (ii) require any filing by Parent or Purchaser with, or any permit, authorization, consent or approval of, any Governmental or Regulatory Authority. SECTION 3. PURCHASE AND SALE OF THE SHARES. Each of the Stockholders hereby agrees to tender the Shares set forth opposite its name on Annex I to this Agreement into the Offer promptly, and in any event no later than the fifth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement and not to withdraw any Shares so tendered unless the Offer is terminated or has expired; provided that if such Stockholder shall thereafter acquire shares of Common Stock, then any such Shares shall be tendered on the next succeeding business day after such acquisition. Purchaser hereby agrees to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. TRANSFER OF THE SHARES; PROXIES AND NON-INTERFERENCE. Prior to the termination of this Agreement, except as otherwise provided herein, none of the Stockholders shall, directly or indirectly, (i) offer for sale, sell, transfer, tender, pledge, encumber, assign, or otherwise dispose of, any or all of the Shares; (ii) enter into any Contract, option or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) except as provided herein, grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares; or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Stockholder's obligations hereunder or the transactions contemplated hereby. SECTION 5. STOCKHOLDER CAPACITY. No person executing this Agreement who is or becomes during the term hereof a director of the Company makes any agreement or understanding herein in his or her capacity as such director. Each Shareholder signs solely in his or her capacity as the owner of, or the trustee of a trust whose beneficiaries are the owners of, such Shareholder Shares. SECTION 6. CERTAIN EVENTS. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by any Stockholder, the number of Shares shall be adjusted appropriately, and this Agreement and the rights and obligations hereunder shall attach to any additional shares 3 of Common Stock or other securities or rights of the Company issued to or acquired by any such Stockholder. SECTION 7. CERTAIN OTHER AGREEMENTS. From the date of this Agreement until the earlier of the termination of this Agreement or the Effective Time, none of the Stockholders shall, and none of the Stockholders shall permit or authorize any advisor or representative retained by or acting for or on behalf of any such Stockholder to, directly or indirectly, (i) take any action to initiate, solicit, continue, encourage or facilitate (including by way of furnishing or disclosing non-public information) any inquiries or the making of any offer or proposal with respect to a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries or any proposal or offer to acquire in any manner, directly or indirectly, 15% or more of the shares of any class of voting securities of the Company or any of its subsidiaries or a substantial portion of the assets of the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement or by this Agreement (any of the foregoing being referred to as an "Acquisition Proposal"), or (ii) engage in negotiations, discussions or communications regarding or disclose any information relating to the Company or any of its subsidiaries or afford access to the properties, books or records of the Company or any of its subsidiaries to any person, corporation, partnership or other entity or group (a "Potential Acquiror") that may be considering making, or has made, an Acquisition Proposal or knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal or accept an Acquisition Proposal. The obligations of each of the Stockholders pursuant to this Section are several and not joint. SECTION 8. FURTHER ASSURANCES. Each of the Stockholders shall, upon request of Parent or Purchaser, take such further actions as may reasonably be necessary or desirable to carry out the provisions hereof, provided that the Stockholders shall not be required to incur any additional costs or expenses or receive less-than the agreed price without their consent. SECTION 9. TERMINATION. Except as otherwise provided in this Agreement, this Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (i) the consummation of the Offer, (ii) the termination of the Merger Agreement in accordance with its terms or (iii) the Effective Time; provided, however, that Sections 7 and 10 shall survive any termination of this Agreement. SECTION 10. EXPENSES. All fees and expenses incurred by any one party hereto shall be borne by the party incurring such fees and expenses. SECTION 11. PUBLIC ANNOUNCEMENTS. Each of the Stockholders, Parent and Purchaser agrees that it will not issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. The obligations of each of the Stockholders pursuant to this Section are several and not joint. 4 SECTION 12. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings indicated below: "CONTRACT" means any agreement, lease, evidence of indebtedness, mortgage, indenture, security agreement or other contract (whether written or oral). "LAW" means any law, statute, rule, regulation, ordinance and other pronouncement having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "LIENS" means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing. "GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "ORDER" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). SECTION 13. MISCELLANEOUS. (a) All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers: (A) if to any or all the Stockholders, to: Paul Stoffel Capital Corp. 5949 Sherry Lane Suite 1465 Dallas, Texas 75225 Facsimile: (214) 750-7754 and 5 (B) if to Parent or Purchaser, to: Affiliated Computer Services, Inc. 2828 N. Haskell, 10th Floor Dallas, Texas 75204 David Black Facsimile: (214) 823-5746 with a copy to: David G. Luther, Jr. Hughes & Luce LLP 1717 Main Street Suite 2800 Dallas, Texas 75201 Facsimile: (214) 939-6100 All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon receipt, and (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto. (b) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (c) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (d) This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (e) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas without giving effect to the principles of conflicts of laws thereof; provided, however, that the consummation and effectiveness of the Merger will be governed and construed in accordance with the laws of the State of Delaware. (f) Each party hereby irrevocably submits to the exclusive jurisdiction of the courts in the State of Texas or the United States District Court for the Northern District of Texas 6 in any action, suit or proceeding arising in connection with this Agreement, and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein); provided, however, that such consent to jurisdiction is solely for the purpose referred to in this paragraph (f) and shall not be deemed to be a general submission to the jurisdiction of said Courts or in the State of Texas other than for such purposes. Each party hereto hereby waives any right to a trial by jury in connection with any such action, suit or proceeding. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, and any such purported assignment shall be null and void; provided, however, Purchaser or Parent may, without the prior written consent of any Stockholder assign its rights and obligations to any of its direct or indirect wholly owned subsidiaries. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledge and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect to this Agreement shall be effective unless it shall be in writing and signed by each party hereto; provided that Annex I hereto may be supplemented by Parent by adding the name and other relevant information concerning any stockholder of the Company who agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added stockholder shall be treated as a "Stockholder" for all purposes of this Agreement. [THE REMAINDER OF PAGE IS INTENTIONALLY OMITTED] 7 IN WITNESS WHEREOF, each of Parent, the Purchaser and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above. AFFILIATED COMPUTER SERVICES, INC. By: ----------------------------------------- Name: Mark A. King Title: Executive Vice President ACS ACQUISITION CORPORATION By: ----------------------------------------- Name: Mark A. King Title: Vice President [STOCKHOLDERS] -------------------------------------------- Paul T. Stoffel -------------------------------------------- Kathryn Ayres Esping, individually and as Independent Executor of the Estate of P.E. Esping and as Director of the Esping Family Foundation, Inc. -------------------------------------------- -------------------------------------------- 8 ANNEX I Ownership of Company Common Stock
STOCKHOLDER NUMBER OF SHARES - ----------- ---------------- Kathryn Ayres Esping, individually and 2,960,890 as Independent Executor of the Estate of P.E. Esping and as Director of the Esping Family Foundation, Inc. Paul Stoffel 344,246
9 EX-2 3 EXHIBIT 2 TRANSITIONAL COMPENSATION AGREEMENT THIS AGREEMENT, made this 9th day of October, 1998, by and between JERROLD L. MORRISON (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Executive is presently employed as an executive of the Company; and WHEREAS, the Company considers the retention of a sound management team to be essential to protecting and enhancing the interest of the Company and its Stockholders; and WHEREAS, the Company wishes to have the benefit of the Executive's full time and attention to the affairs of the Company, particularly during any period in which the Company is considering material corporate transactions involving its equity securities, mergers with other companies which may result in a change of control, or other circumstances that might cause a diversion of the Executive's attention; WHEREAS, the Company has proposed this Agreement as a means of reducing any uncertainty that Executive may be subject to; and WHEREAS, the Executive wishes to obtain the benefits offered by this Agreement and to be subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual convenants hereinafter set forth, the parties do hereby agree as follows: 1. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. The Executive shall be eligible to receive transitional compensation, in the amounts and at the times described in Paragraph 3, in the event that: (a) his employment with the Company is terminated within 18 months of a "change in control," as such term is hereinafter defined; and (b) the Executive's termination of employment is not on account of: (i) retirement on or after reaching age 65; (ii) the Executive's death; (iii) termination by the Company following a conviction of the Executive of a felony involving moral turpitude or a determination by the Board of Directors that the Executive has continued to engage, following notice from the Board, in misconduct or dereliction of duty which is detrimental in a material way to the business of the Company or its subsidiaries; or (iv) the Executive's voluntary resignation following a change of control; PROVIDED that a resignation shall not be considered to be voluntary for the purposes of this Agreement if it occurs if the Executive terminates his employment more than sixty days following a change of control and following: (A) a substantial diminution in Executive's duties with the Company from the duties existing immediately prior to any change of control; (B) a reduction by the Company in the Executive's annual base salary in effect on the date of a change of control or as in effect thereafter if such annual base salary has been increased and such increase was approved prior to the change of control; (C) a substantial reduction by the Company in the overall value of employee-related benefits provided to the Executive from those in effect on the date of a change in control or as in effect thereafter if such benefits have been increased and that increase was approved prior to the change of control; (D) a failure to continue in effect any incentive compensation plan in effect immediately prior to the change in control, or a reduction in Executive's participation or entitlement with regard thereto, unless the Executive is afforded an opportunity of reasonably equivalent value; (E) a significant reduction in the Executive's perquisites and other benefits enjoyed immediately prior to a change of control; (F) relocation of Executive's principle place of employment to a place more than fifty miles from the Executive's principle place of employment as of the change of control; (G) any material breach by the Company of any provision of this Agreement or of any incentive compensation, stock option or similar benefit plan of the Company in which Executive then participates or is eligible to participate; or (H) conduct by the Company, against Executive's volition, which could cause the Executive to commit, on his own behalf or as an officer of the Company, a fraudulent act or which could expose the Executive to civil or criminal liability or to sanction by any professional licensing body or self-regulatory organization. 2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in control" shall be deemed to have occurred if prior to May 1, 1999: (a) any "person" (as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) (the "Exchange Act"), other than the Company, becomes the beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act of securities of the Company representing more than fifty percent of the voting power of all of the then outstanding voting securities of the Company; (b) persons who, at the beginning of any twelve consecutive month period, constitute the Board of Directors of the Company cease, at the end of such period, to constitute at least a majority thereof, unless the nomination of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; (c) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock 2. of the Company would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock of the Company immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after such merger or which would result in voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately following the consolidation or merger in question; (d) any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of all, or substantially all, of the assets of the Company; (e) approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company or the sale, lease, exchange or other transfer (in one transaction or a series of transactions) of assets of the Company in a transaction approved by stockholders of the Company; (f) any change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof, promulgated under the Exchange Act. 3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the Executive is eligible for transitional compensation pursuant to the provisions of Paragraph 1 hereof, he shall be entitled to receive the following: (a) a lump sum cash payment, payable within 10 days after the date of Executive's termination, in an amount equal to the Executive's Annual Compensation (as hereinafter defined). For the purposes hereof, the Executive's Annual Compensation, as of any point in time, shall be equal to the sum of (i) an amount equal to the average of the Executive's salary for the twelve months preceding the change of control in question, plus (ii) an amount equal to the cash bonuses received by the Executive during the twelve calendar months preceding such change of control. The Executive's average monthly base salary, for the purposes of the preceding sentence, shall be the amount to which Executive is entitled, prior to reduction for deferred compensation or salary reduction arrangements, including plans and arrangements contemplated under Section 401(k) and Section 125 of the Code. (b) outplacement services at a qualified agency selected by the Executive (not to exceed $25,000); (c) continuation of coverage under the Company's group medical, group life, and group long-term disability plans, if any, and under any policy or policies of "split dollar" life insurance maintained by the Company, until the earliest to occur of: 3. (i) the expiration of 24 months from the date on which his employment terminates; or (ii) the date on which he obtains comparable coverage provided by a new employer. 4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained shall require or be deemed to require the Company to segregate, earmark, or otherwise set aside any funds or assets to provide for any payments required to be made hereunder, and the Executive's right to transitional compensation hereunder shall be solely that of a general, unsecured creditor of the Company. 5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to amend or modify the provisions of any other agreement or arrangement between the Company and the Executive. Without limiting the generality of the foregoing, notwithstanding any change of control or other transaction, the terms and conditions of the Company's various stock option plans and any applicable award agreements thereunder shall control with respect to the vesting of any options or other awards thereunder then held by the Executive. No provision of this Agreement shall restrict the Company's ability to amend any agreement to which it is a party, any stock option or benefit plan established by it or any of the provisions of its Certificate of Incorporation or By-laws. 6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of the Executive pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by the Executive or required by applicable law. 7. DEATH. In the event of the Executive's death, any amount or benefit payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the beneficiary designated by such Executive for such purpose in the last written instrument received by the party prior to the Executive's death, if any, and otherwise to the Executive's estate. 8. SETOFF. The right of Executive to receive benefits under this Agreement shall be absolute and, except as specifically provided herein, shall not be subject to any setoff, counterclaim, recoupment, defense, duty to mitigate or other rights the Company may have. Notwithstanding anything herein to the contrary, benefits to Executive accruing under this Agreement shall be offset by the amount of any severance benefits otherwise payable to Executive under any Company plan or policy applicable to employees of the Company generally. 9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the Company to provide the Executive the benefits of the indemnities provided by the Company's Certificate of Incorporation, by-laws, any agreements between the Company and the Executive providing for indemnity, and Executive's rights under applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights exist prior to any change of control. To the extent that the Executive's Indemnity Rights under the Company's Certificate of Incorporation or By-laws or under any agreement between the Company and the Executive shall be reduced following a change of control (including any reduction resulting from the termination of Executive's employment with 4. the Company), the Indemnity Rights existing prior to such change or modification shall be deemed contractual in nature and due and owing to the Executive pursuant to this Section 9 and shall survive any change of control or termination of Executive's employment with the Company indefinitely. The provisions of this Section 9 shall inure to the benefit of the Executive's personal or legal representatives, executives, administrators, successors, heirs, distributees, divisees and legatees. 10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no obligation to seek other employment or take any other action in an effort to mitigate damages. 11. OTHER BENEFITS. Except to the extent otherwise specifically provided herein, the benefits provided under this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that the Executive may be entitled to receive under any other plan or program now or hereafter maintained by the Company or by any of its subsidiaries. 12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment. Nothing expressed or implied herein shall create any right or duty of continued employment of the Executive by the Company. The Company reserves all rights to terminate the Executive's employment at any time with or without cause. 13. SUCCESSORS. (a) The Company will require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or any substantially part of the business and/or assets of the Company and its subsidiaries, taken as a whole, to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place unless, in the opinion of legal counsel to the Executive, such obligations have been assumed by the successor as a matter of law. No assumption of the Company's obligations shall relieve the Company of such obligations. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession (unless the foregoing opinion is rendered to the Executive) shall entitle the Executive to terminate his employment and to receive the payments provided for in Paragraphs 3 and 9 above. As used in the Agreement, the "Company" shall mean the Company, as presently constituted, and any successor to its business and/or assets which executes and delivers the agreement provide for in this Paragraph 16 or which otherwise becomes bound by all the terms and provisions of this Agreement as a matter of law. (b) If the Executive dies while any amounts are payable to him pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure to the benefit of, and shall be enforceable by the Executive's legal representative or other successors in interest, but shall not otherwise be assignable or transferable. 5. 14. GENERAL PROVISIONS. (a) NOTICES. Any notices referred to herein shall be in writing and shall be sufficient if delivered in person or sent by U.S. registered or certified mail to the Executive at his address on file with the Company, or to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247, Attn: President. (b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of any provision of this Agreement shall be effective unless approved in writing by both parties. Either party's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof. (c) ENFORCEABILITY. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (d) HEADINGS. The headings and paragraph designations of this Agreement are included solely for convenience of reference and shall in no event by construed to affect or modify any provisions of this Agreement. (e) GENDER AND NUMBER. In this Agreement where the context admits, words in any gender shall include the other genders, words in the plural shall include the singular, and words in the singular shall include the plural. (f) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same documents. 15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement shall terminate if the Executive's employment with the Company is terminated, either voluntarily or involuntarily, for any reason prior to a change in control of the Company. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute this Agreement and the Executive has executed this Agreement as of the date set forth above. BRC HOLDINGS, INC. By: /s/ Paul T. Stoffel -------------------------------- Its: Chairman ------------------------------- /s/ Jerrold L. Morrison ----------------------------------- (Executive) 6. EX-3 4 EXHIBIT 3 TRANSITIONAL COMPENSATION AGREEMENT THIS AGREEMENT, made this 9th day of October, 1998, by and between HARVEY V. BRASWELL (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Executive is presently employed as an executive of the Company; and WHEREAS, the Company considers the retention of a sound management team to be essential to protecting and enhancing the interest of the Company and its Stockholders; and WHEREAS, the Company wishes to have the benefit of the Executive's full time and attention to the affairs of the Company, particularly during any period in which the Company is considering material corporate transactions involving its equity securities, mergers with other companies which may result in a change of control, or other circumstances that might cause a diversion of the Executive's attention; WHEREAS, the Company has proposed this Agreement as a means of reducing any uncertainty that Executive may be subject to; and WHEREAS, the Executive wishes to obtain the benefits offered by this Agreement and to be subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual convenants hereinafter set forth, the parties do hereby agree as follows: 1. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. The Executive shall be eligible to receive transitional compensation, in the amounts and at the times described in Paragraph 3, in the event that: (a) his employment with the Company is terminated within 18 months of a "change in control," as such term is hereinafter defined; and (b) the Executive's termination of employment is not on account of: (i) retirement on or after reaching age 65; (ii) the Executive's death; (iii) termination by the Company following a conviction of the Executive of a felony involving moral turpitude or a determination by the Board of Directors that the Executive has continued to engage, following notice from the Board, in misconduct or dereliction of duty which is detrimental in a material way to the business of the Company or its subsidiaries; or (iv) the Executive's voluntary resignation following a change of control; PROVIDED that a resignation shall not be considered to be voluntary for the purposes of this Agreement if it occurs if the Executive terminates his employment more than sixty days following a change of control and following: (A) a substantial diminution in Executive's duties with the Company from the duties existing immediately prior to any change of control; (B) a reduction by the Company in the Executive's annual base salary in effect on the date of a change of control or as in effect thereafter if such annual base salary has been increased and such increase was approved prior to the change of control; (C) a substantial reduction by the Company in the overall value of employee-related benefits provided to the Executive from those in effect on the date of a change in control or as in effect thereafter if such benefits have been increased and that increase was approved prior to the change of control; (D) a failure to continue in effect any incentive compensation plan in effect immediately prior to the change in control, or a reduction in Executive's participation or entitlement with regard thereto, unless the Executive is afforded an opportunity of reasonably equivalent value; (E) a significant reduction in the Executive's perquisites and other benefits enjoyed immediately prior to a change of control; (F) relocation of Executive's principle place of employment to a place more than fifty miles from the Executive's principle place of employment as of the change of control; (G) any material breach by the Company of any provision of this Agreement or of any incentive compensation, stock option or similar benefit plan of the Company in which Executive then participates or is eligible to participate; or (H) conduct by the Company, against Executive's volition, which could cause the Executive to commit, on his own behalf or as an officer of the Company, a fraudulent act or which could expose the Executive to civil or criminal liability or to sanction by any professional licensing body or self-regulatory organization. 2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in control" shall be deemed to have occurred if prior to May 1, 1999: (a) any "person" (as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) (the "Exchange Act"), other than the Company, becomes the beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act of securities of the Company representing more than fifty percent of the voting power of all of the then outstanding voting securities of the Company; (b) persons who, at the beginning of any twelve consecutive month period, constitute the Board of Directors of the Company cease, at the end of such period, to constitute at least a majority thereof, unless the nomination of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; (c) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock 2. of the Company would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock of the Company immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after such merger or which would result in voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately following the consolidation or merger in question; (d) any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of all, or substantially all, of the assets of the Company; (e) approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company or the sale, lease, exchange or other transfer (in one transaction or a series of transactions) of assets of the Company in a transaction approved by stockholders of the Company; (f) any change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof, promulgated under the Exchange Act. 3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the Executive is eligible for transitional compensation pursuant to the provisions of Paragraph 1 hereof, he shall be entitled to receive the following: (a) a lump sum cash payment, payable within 10 days after the date of Executive's termination, in an amount equal to the Executive's Annual Compensation (as hereinafter defined). For the purposes hereof, the Executive's Annual Compensation, as of any point in time, shall be equal to the sum of (i) an amount equal to the average of the Executive's salary for the twelve months preceding the change of control in question, plus (ii) an amount equal to the cash bonuses received by the Executive during the twelve calendar months preceding such change of control. The Executive's average monthly base salary, for the purposes of the preceding sentence, shall be the amount to which Executive is entitled, prior to reduction for deferred compensation or salary reduction arrangements, including plans and arrangements contemplated under Section 401(k) and Section 125 of the Code. (b) outplacement services at a qualified agency selected by the Executive (not to exceed $25,000); (c) continuation of coverage under the Company's group medical, group life, and group long-term disability plans, if any, and under any policy or policies of "split dollar" life insurance maintained by the Company, until the earliest to occur of: 3. (i) the expiration of 24 months from the date on which his employment terminates; or (ii) the date on which he obtains comparable coverage provided by a new employer. 4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained shall require or be deemed to require the Company to segregate, earmark, or otherwise set aside any funds or assets to provide for any payments required to be made hereunder, and the Executive's right to transitional compensation hereunder shall be solely that of a general, unsecured creditor of the Company. 5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to amend or modify the provisions of any other agreement or arrangement between the Company and the Executive. Without limiting the generality of the foregoing, notwithstanding any change of control or other transaction, the terms and conditions of the Company's various stock option plans and any applicable award agreements thereunder shall control with respect to the vesting of any options or other awards thereunder then held by the Executive. No provision of this Agreement shall restrict the Company's ability to amend any agreement to which it is a party, any stock option or benefit plan established by it or any of the provisions of its Certificate of Incorporation or By-laws. 6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of the Executive pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by the Executive or required by applicable law. 7. DEATH. In the event of the Executive's death, any amount or benefit payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the beneficiary designated by such Executive for such purpose in the last written instrument received by the party prior to the Executive's death, if any, and otherwise to the Executive's estate. 8. SETOFF. The right of Executive to receive benefits under this Agreement shall be absolute and, except as specifically provided herein, shall not be subject to any setoff, counterclaim, recoupment, defense, duty to mitigate or other rights the Company may have. Notwithstanding anything herein to the contrary, benefits to Executive accruing under this Agreement shall be offset by the amount of any severance benefits otherwise payable to Executive under any Company plan or policy applicable to employees of the Company generally. 9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the Company to provide the Executive the benefits of the indemnities provided by the Company's Certificate of Incorporation, by-laws, any agreements between the Company and the Executive providing for indemnity, and Executive's rights under applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights exist prior to any change of control. To the extent that the Executive's Indemnity Rights under the Company's Certificate of Incorporation or By-laws or under any agreement between the Company and the Executive shall be reduced following a change of control (including any reduction resulting from the termination of Executive's employment with 4. the Company), the Indemnity Rights existing prior to such change or modification shall be deemed contractual in nature and due and owing to the Executive pursuant to this Section 9 and shall survive any change of control or termination of Executive's employment with the Company indefinitely. The provisions of this Section 9 shall inure to the benefit of the Executive's personal or legal representatives, executives, administrators, successors, heirs, distributees, divisees and legatees. 10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no obligation to seek other employment or take any other action in an effort to mitigate damages. 11. OTHER BENEFITS. Except to the extent otherwise specifically provided herein, the benefits provided under this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that the Executive may be entitled to receive under any other plan or program now or hereafter maintained by the Company or by any of its subsidiaries. 12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment. Nothing expressed or implied herein shall create any right or duty of continued employment of the Executive by the Company. The Company reserves all rights to terminate the Executive's employment at any time with or without cause. 13. SUCCESSORS. (a) The Company will require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or any substantially part of the business and/or assets of the Company and its subsidiaries, taken as a whole, to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place unless, in the opinion of legal counsel to the Executive, such obligations have been assumed by the successor as a matter of law. No assumption of the Company's obligations shall relieve the Company of such obligations. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession (unless the foregoing opinion is rendered to the Executive) shall entitle the Executive to terminate his employment and to receive the payments provided for in Paragraphs 3 and 9 above. As used in the Agreement, the "Company" shall mean the Company, as presently constituted, and any successor to its business and/or assets which executes and delivers the agreement provide for in this Paragraph 16 or which otherwise becomes bound by all the terms and provisions of this Agreement as a matter of law. (b) If the Executive dies while any amounts are payable to him pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure to the benefit of, and shall be enforceable by the Executive's legal representative or other successors in interest, but shall not otherwise be assignable or transferable. 5. 14. GENERAL PROVISIONS. (a) NOTICES. Any notices referred to herein shall be in writing and shall be sufficient if delivered in person or sent by U.S. registered or certified mail to the Executive at his address on file with the Company, or to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247, Attn: President. (b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of any provision of this Agreement shall be effective unless approved in writing by both parties. Either party's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof. (c) ENFORCEABILITY. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (d) HEADINGS. The headings and paragraph designations of this Agreement are included solely for convenience of reference and shall in no event by construed to affect or modify any provisions of this Agreement. (e) GENDER AND NUMBER. In this Agreement where the context admits, words in any gender shall include the other genders, words in the plural shall include the singular, and words in the singular shall include the plural. (f) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same documents. 15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement shall terminate if the Executive's employment with the Company is terminated, either voluntarily or involuntarily, for any reason prior to a change in control of the Company. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute this Agreement and the Executive has executed this Agreement as of the date set forth above. BRC HOLDINGS, INC. By: /s/ Paul T. Stoffel -------------------------------- Its: Chairman ------------------------------- /s/ Harvey V. Braswell ----------------------------------- (Executive) 6. EX-4 5 EXHIBIT 4 TRANSITIONAL COMPENSATION AGREEMENT THIS AGREEMENT, made this 9th day of October, 1998, by and between THOMAS E. KIRALY (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Executive is presently employed as an executive of the Company; and WHEREAS, the Company considers the retention of a sound management team to be essential to protecting and enhancing the interest of the Company and its Stockholders; and WHEREAS, the Company wishes to have the benefit of the Executive's full time and attention to the affairs of the Company, particularly during any period in which the Company is considering material corporate transactions involving its equity securities, mergers with other companies which may result in a change of control, or other circumstances that might cause a diversion of the Executive's attention; WHEREAS, the Company has proposed this Agreement as a means of reducing any uncertainty that Executive may be subject to; and WHEREAS, the Executive wishes to obtain the benefits offered by this Agreement and to be subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual convenants hereinafter set forth, the parties do hereby agree as follows: 1. STAY BONUS AND TRANSITIONAL COMPENSATION. In the event that Executive shall continue to be employed by the Company on the last day of the sixth calendar month following a "change of control," as such term is hereinafter defined, he shall be entitled to receive as a "stay bonus" a lump sum cash payment equal to $150,000 not later than the tenth day thereafter. In addition, the Executive shall be eligible to receive "transitional compensation," in the amounts and at the times described in Paragraph 3, in the event that: (a) his employment with the Company is terminated within 18 months of a "change in control," as such term is hereinafter defined; and (b) the Executive's termination of employment is not on account of: (i) retirement on or after reaching age 65; (ii) the Executive's death; (iii) termination by the Company following a conviction of the Executive of a felony involving moral turpitude or a determination by the Board of Directors that the Executive has continued to engage, following notice from the Board, in misconduct or dereliction of duty which is detrimental in a material way to the business of the Company or its subsidiaries; or (iv) the Executive's voluntary resignation following a change of control; PROVIDED that a resignation shall not be considered to be voluntary for the purposes of this Agreement if it occurs if the Executive terminates his employment more than sixty days following a change of control and following: (A) a substantial diminution in Executive's duties with the Company from the duties existing immediately prior to any change of control; (B) a reduction by the Company in the Executive's annual base salary in effect on the date of a change of control or as in effect thereafter if such annual base salary has been increased and such increase was approved prior to the change of control; (C) a substantial reduction by the Company in the overall value of employee-related benefits provided to the Executive from those in effect on the date of a change in control or as in effect thereafter if such benefits have been increased and that increase was approved prior to the change of control; (D) a failure to continue in effect any incentive compensation plan in effect immediately prior to the change in control, or a reduction in Executive's participation or entitlement with regard thereto, unless the Executive is afforded an opportunity of reasonably equivalent value; (E) a significant reduction in the Executive's perquisites and other benefits enjoyed immediately prior to a change of control; (F) relocation of Executive's principle place of employment to a place more than fifty miles from the Executive's principle place of employment as of the change of control; (G) any material breach by the Company of any provision of this Agreement or of any incentive compensation, stock option or similar benefit plan of the Company in which Executive then participates or is eligible to participate; or (H) conduct by the Company, against Executive's volition, which could cause the Executive to commit, on his own behalf or as an officer of the Company, a fraudulent act or which could expose the Executive to civil or criminal liability or to sanction by any professional licensing body or self-regulatory organization. 2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in control" shall be deemed to have occurred if prior to May 1, 1999: (a) any "person" (as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) (the "Exchange Act"), other than the Company, becomes the beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act of securities of the Company representing more than fifty percent of the voting power of all of the then outstanding voting securities of the Company; (b) persons who, at the beginning of any twelve consecutive month period, constitute the Board of Directors of the Company cease, at the end of such period, to constitute at least a majority thereof, unless the nomination of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; 2. (c) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock of the Company would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock of the Company immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after such merger or which would result in voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately following the consolidation or merger in question; (d) any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of all, or substantially all, of the assets of the Company; (e) approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company or the sale, lease, exchange or other transfer (in one transaction or a series of transactions) of assets of the Company in a transaction approved by stockholders of the Company; (f) any change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof, promulgated under the Exchange Act. 3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the Executive is eligible for transitional compensation pursuant to the provisions of Paragraph 1 hereof, he shall be entitled to receive the following: (a) a lump sum cash payment, payable within 10 days after the date of Executive's termination, in an amount equal to $300,000 if the termination is effective prior to the passage of six calendar months following a Change of Control for any reason other than a voluntary termination by Executive described in paragraph 1(b)(iv)(A) and $150,000 in any other termination giving rise to transitional compensation. (b) outplacement services at a qualified agency selected by the Executive (not to exceed $25,000); (c) continuation of coverage under the Company's group medical, group life, and group long-term disability plans, if any, and under any policy or policies of "split dollar" life insurance maintained by the Company, until the earliest to occur of: (i) the expiration of 24 months from the date on which his employment terminates; or (ii) the date on which he obtains comparable coverage provided by a new employer. 3. 4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained shall require or be deemed to require the Company to segregate, earmark, or otherwise set aside any funds or assets to provide for any payments required to be made hereunder, and the Executive's right to transitional compensation hereunder shall be solely that of a general, unsecured creditor of the Company. 5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to amend or modify the provisions of any other agreement or arrangement between the Company and the Executive. Without limiting the generality of the foregoing, notwithstanding any change of control or other transaction, the terms and conditions of the Company's various stock option plans and any applicable award agreements thereunder shall control with respect to the vesting of any options or other awards thereunder then held by the Executive. No provision of this Agreement shall restrict the Company's ability to amend any agreement to which it is a party, any stock option or benefit plan established by it or any of the provisions of its Certificate of Incorporation or By-laws. 6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of the Executive pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by the Executive or required by applicable law. 7. DEATH. In the event of the Executive's death, any amount or benefit payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the beneficiary designated by such Executive for such purpose in the last written instrument received by the party prior to the Executive's death, if any, and otherwise to the Executive's estate. 8. SETOFF. The right of Executive to receive benefits under this Agreement shall be absolute and, except as specifically provided herein, shall not be subject to any setoff, counterclaim, recoupment, defense, duty to mitigate or other rights the Company may have. Notwithstanding anything herein to the contrary, benefits to Executive accruing under this Agreement shall be offset by the amount of any severance benefits otherwise payable to Executive under any Company plan or policy applicable to employees of the Company generally. 9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the Company to provide the Executive the benefits of the indemnities provided by the Company's Certificate of Incorporation, by-laws, any agreements between the Company and the Executive providing for indemnity, and Executive's rights under applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights exist prior to any change of control. To the extent that the Executive's Indemnity Rights under the Company's Certificate of Incorporation or By-laws or under any agreement between the Company and the Executive shall be reduced following a change of control (including any reduction resulting from the termination of Executive's employment with the Company), the Indemnity Rights existing prior to such change or modification shall be deemed contractual in nature and due and owing to the Executive pursuant to this Section 9 and shall survive any change of control or termination of Executive's employment with the Company indefinitely. The provisions of this Section 9 shall inure to the benefit of the Executive's personal or legal representatives, executives, administrators, successors, heirs, distributees, divisees and legatees. 4. 10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no obligation to seek other employment or take any other action in an effort to mitigate damages. 11. OTHER BENEFITS. Except to the extent otherwise specifically provided herein, the benefits provided under this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that the Executive may be entitled to receive under any other plan or program now or hereafter maintained by the Company or by any of its subsidiaries. 12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment. Nothing expressed or implied herein shall create any right or duty of continued employment of the Executive by the Company. The Company reserves all rights to terminate the Executive's employment at any time with or without cause. 13. SUCCESSORS. (a) The Company will require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or any substantially part of the business and/or assets of the Company and its subsidiaries, taken as a whole, to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place unless, in the opinion of legal counsel to the Executive, such obligations have been assumed by the successor as a matter of law. No assumption of the Company's obligations shall relieve the Company of such obligations. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession (unless the foregoing opinion is rendered to the Executive) shall entitle the Executive to terminate his employment and to receive the payments provided for in Paragraphs 3 and 9 above. As used in the Agreement, the "Company" shall mean the Company, as presently constituted, and any successor to its business and/or assets which executes and delivers the agreement provide for in this Paragraph 16 or which otherwise becomes bound by all the terms and provisions of this Agreement as a matter of law. (b) If the Executive dies while any amounts are payable to him pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure to the benefit of, and shall be enforceable by the Executive's legal representative or other successors in interest, but shall not otherwise be assignable or transferable. 14. GENERAL PROVISIONS. (a) NOTICES. Any notices referred to herein shall be in writing and shall be sufficient if delivered in person or sent by U.S. registered or certified mail to the Executive at his address on file with the Company, or to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247, Attn: President. (b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of any provision of this Agreement shall be effective unless approved in writing by both 5. parties. Either party's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof. (c) ENFORCEABILITY. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (d) HEADINGS. The headings and paragraph designations of this Agreement are included solely for convenience of reference and shall in no event by construed to affect or modify any provisions of this Agreement. (e) GENDER AND NUMBER. In this Agreement where the context admits, words in any gender shall include the other genders, words in the plural shall include the singular, and words in the singular shall include the plural. (f) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same documents. 15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement shall terminate if the Executive's employment with the Company is terminated, either voluntarily or involuntarily, for any reason prior to a change in control of the Company. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute this Agreement and the Executive has executed this Agreement as of the date set forth above. BRC HOLDINGS, INC. By: /s/ Paul T. Stoffel -------------------------------- Its: Chairman ------------------------------- /s/ Thomas E. Kiraly ----------------------------------- (Executive) 6. EX-5 6 EXHIBIT 5 TRANSITIONAL COMPENSATION AGREEMENT THIS AGREEMENT, made this 9th day of October, 1998, by and between BERNARD J. OWENS (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Executive is presently employed as an executive of the Company; and WHEREAS, the Company considers the retention of a sound management team to be essential to protecting and enhancing the interest of the Company and its Stockholders; and WHEREAS, the Company wishes to have the benefit of the Executive's full time and attention to the affairs of the Company, particularly during any period in which the Company is considering material corporate transactions involving its equity securities, mergers with other companies which may result in a change of control, or other circumstances that might cause a diversion of the Executive's attention; WHEREAS, the Company has proposed this Agreement as a means of reducing any uncertainty that Executive may be subject to; and WHEREAS, the Executive wishes to obtain the benefits offered by this Agreement and to be subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual convenants hereinafter set forth, the parties do hereby agree as follows: 1. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. The Executive shall be eligible to receive transitional compensation, in the amounts and at the times described in Paragraph 3, in the event that: (a) his employment with the Company is terminated within 18 months of a "change in control," as such term is hereinafter defined; and (b) the Executive's termination of employment is not on account of: (i) retirement on or after reaching age 65; (ii) the Executive's death; (iii) termination by the Company following a conviction of the Executive of a felony involving moral turpitude or a determination by the Board of Directors that the Executive has continued to engage, following notice from the Board, in misconduct or dereliction of duty which is detrimental in a material way to the business of the Company or its subsidiaries; or (iv) the Executive's voluntary resignation following a change of control; PROVIDED that a resignation shall not be considered to be voluntary for the purposes of this Agreement if it occurs if the Executive terminates his employment more than sixty days following a change of control and following: (A) a substantial diminution in Executive's duties with the Company from the duties existing immediately prior to any change of control; (B) a reduction by the Company in the Executive's annual base salary in effect on the date of a change of control or as in effect thereafter if such annual base salary has been increased and such increase was approved prior to the change of control; (C) a substantial reduction by the Company in the overall value of employee-related benefits provided to the Executive from those in effect on the date of a change in control or as in effect thereafter if such benefits have been increased and that increase was approved prior to the change of control; (D) a failure to continue in effect any incentive compensation plan in effect immediately prior to the change in control, or a reduction in Executive's participation or entitlement with regard thereto, unless the Executive is afforded an opportunity of reasonably equivalent value; (E) a significant reduction in the Executive's perquisites and other benefits enjoyed immediately prior to a change of control; (F) relocation of Executive's principle place of employment to a place more than fifty miles from the Executive's principle place of employment as of the change of control; (G) any material breach by the Company of any provision of this Agreement or of any incentive compensation, stock option or similar benefit plan of the Company in which Executive then participates or is eligible to participate; or (H) conduct by the Company, against Executive's volition, which could cause the Executive to commit, on his own behalf or as an officer of the Company, a fraudulent act or which could expose the Executive to civil or criminal liability or to sanction by any professional licensing body or self-regulatory organization. 2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in control" shall be deemed to have occurred if prior to May 1, 1999: (a) any "person" (as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) (the "Exchange Act"), other than the Company, becomes the beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act of securities of the Company representing more than fifty percent of the voting power of all of the then outstanding voting securities of the Company; (b) persons who, at the beginning of any twelve consecutive month period, constitute the Board of Directors of the Company cease, at the end of such period, to constitute at least a majority thereof, unless the nomination of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; (c) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock 2. of the Company would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock of the Company immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after such merger or which would result in voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity immediately following the consolidation or merger in question; (d) any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of all, or substantially all, of the assets of the Company; (e) approval by the Company's stockholders of any plan or proposal for the liquidation or dissolution of the Company or the sale, lease, exchange or other transfer (in one transaction or a series of transactions) of assets of the Company in a transaction approved by stockholders of the Company; (f) any change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date hereof, promulgated under the Exchange Act. 3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the Executive is eligible for transitional compensation pursuant to the provisions of Paragraph 1 hereof, he shall be entitled to receive the following: (a) a lump sum cash payment, payable within 10 days after the date of Executive's termination, in an amount equal to the Executive's Annual Compensation (as hereinafter defined). For the purposes hereof, the Executive's Annual Compensation, as of any point in time, shall be equal to the sum of (i) an amount equal to the average of the Executive's salary for the twelve months preceding the change of control in question, plus (ii) an amount equal to the cash bonuses received by the Executive during the twelve calendar months preceding such change of control. The Executive's average monthly base salary, for the purposes of the preceding sentence, shall be the amount to which Executive is entitled, prior to reduction for deferred compensation or salary reduction arrangements, including plans and arrangements contemplated under Section 401(k) and Section 125 of the Code. (b) outplacement services at a qualified agency selected by the Executive (not to exceed $25,000); (c) continuation of coverage under the Company's group medical, group life, and group long-term disability plans, if any, and under any policy or policies of "split dollar" life insurance maintained by the Company, until the earliest to occur of: 3. (i) the expiration of 24 months from the date on which his employment terminates; or (ii) the date on which he obtains comparable coverage provided by a new employer. 4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained shall require or be deemed to require the Company to segregate, earmark, or otherwise set aside any funds or assets to provide for any payments required to be made hereunder, and the Executive's right to transitional compensation hereunder shall be solely that of a general, unsecured creditor of the Company. 5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to amend or modify the provisions of any other agreement or arrangement between the Company and the Executive. Without limiting the generality of the foregoing, notwithstanding any change of control or other transaction, the terms and conditions of the Company's various stock option plans and any applicable award agreements thereunder shall control with respect to the vesting of any options or other awards thereunder then held by the Executive. No provision of this Agreement shall restrict the Company's ability to amend any agreement to which it is a party, any stock option or benefit plan established by it or any of the provisions of its Certificate of Incorporation or By-laws. 6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of the Executive pursuant to this Agreement shall be subject to such deductions and withholding as may be agreed to by the Executive or required by applicable law. 7. DEATH. In the event of the Executive's death, any amount or benefit payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the beneficiary designated by such Executive for such purpose in the last written instrument received by the party prior to the Executive's death, if any, and otherwise to the Executive's estate. 8. SETOFF. The right of Executive to receive benefits under this Agreement shall be absolute and, except as specifically provided herein, shall not be subject to any setoff, counterclaim, recoupment, defense, duty to mitigate or other rights the Company may have. Notwithstanding anything herein to the contrary, benefits to Executive accruing under this Agreement shall be offset by the amount of any severance benefits otherwise payable to Executive under any Company plan or policy applicable to employees of the Company generally. 9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the Company to provide the Executive the benefits of the indemnities provided by the Company's Certificate of Incorporation, by-laws, any agreements between the Company and the Executive providing for indemnity, and Executive's rights under applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights exist prior to any change of control. To the extent that the Executive's Indemnity Rights under the Company's Certificate of Incorporation or By-laws or under any agreement between the Company and the Executive shall be reduced following a change of control (including any reduction resulting from the termination of Executive's employment with 4. the Company), the Indemnity Rights existing prior to such change or modification shall be deemed contractual in nature and due and owing to the Executive pursuant to this Section 9 and shall survive any change of control or termination of Executive's employment with the Company indefinitely. The provisions of this Section 9 shall inure to the benefit of the Executive's personal or legal representatives, executives, administrators, successors, heirs, distributees, divisees and legatees. 10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no obligation to seek other employment or take any other action in an effort to mitigate damages. 11. OTHER BENEFITS. Except to the extent otherwise specifically provided herein, the benefits provided under this Agreement shall be in addition to, and not in derogation or diminution of, any benefits that the Executive may be entitled to receive under any other plan or program now or hereafter maintained by the Company or by any of its subsidiaries. 12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment. Nothing expressed or implied herein shall create any right or duty of continued employment of the Executive by the Company. The Company reserves all rights to terminate the Executive's employment at any time with or without cause. 13. SUCCESSORS. (a) The Company will require any successor or successors (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or any substantially part of the business and/or assets of the Company and its subsidiaries, taken as a whole, to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place unless, in the opinion of legal counsel to the Executive, such obligations have been assumed by the successor as a matter of law. No assumption of the Company's obligations shall relieve the Company of such obligations. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession (unless the foregoing opinion is rendered to the Executive) shall entitle the Executive to terminate his employment and to receive the payments provided for in Paragraphs 3 and 9 above. As used in the Agreement, the "Company" shall mean the Company, as presently constituted, and any successor to its business and/or assets which executes and delivers the agreement provide for in this Paragraph 16 or which otherwise becomes bound by all the terms and provisions of this Agreement as a matter of law. (b) If the Executive dies while any amounts are payable to him pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure to the benefit of, and shall be enforceable by the Executive's legal representative or other successors in interest, but shall not otherwise be assignable or transferable. 5. 14. GENERAL PROVISIONS. (a) NOTICES. Any notices referred to herein shall be in writing and shall be sufficient if delivered in person or sent by U.S. registered or certified mail to the Executive at his address on file with the Company, or to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247, Attn: President. (b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of any provision of this Agreement shall be effective unless approved in writing by both parties. Either party's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof. (c) ENFORCEABILITY. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (d) HEADINGS. The headings and paragraph designations of this Agreement are included solely for convenience of reference and shall in no event by construed to affect or modify any provisions of this Agreement. (e) GENDER AND NUMBER. In this Agreement where the context admits, words in any gender shall include the other genders, words in the plural shall include the singular, and words in the singular shall include the plural. (f) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same documents. 15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement shall terminate if the Executive's employment with the Company is terminated, either voluntarily or involuntarily, for any reason prior to a change in control of the Company. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute this Agreement and the Executive has executed this Agreement as of the date set forth above. BRC HOLDINGS, INC. By: /s/ Paul T. Stoffel -------------------------------- Its: Chairman ------------------------------- /s/ Bernard J. Owens ----------------------------------- (Executive) 6. EX-6 7 EXHIBIT 6 AGREEMENT This Agreement made and entered into this 18th day of October, 1998 by and between BRC Holdings, Inc. a Delaware corporation (the "Company") and Paul Stoffel ("Stoffel"). WITNESSETH: WHEREAS, with the knowledge of the Board of Directors of the Company (the "Board"), Stoffel has from time to time in the past sought expressions of interest from one or more third parties regarding acquisition by such parties of all of the issued and outstanding equity securities of the Company; and WHEREAS, Stoffel has provided certain additional services to the Company in connection with the activities contemplated in the foregoing resolution, including making himself personally available for discussions with third parties regarding the Company, its businesses, assets and affairs and coordinating efforts of the Company's management in providing information to third parties; and WHEREAS, as a result of Stoffel's services, the Company expects to receive a proposal from a third party relating to the acquisition by that third party of all of the Company's issued and outstanding equity securities; and WHEREAS, a disinterested majority of the Board, after full and fair discussion of all matters relating thereto, has unanimously determined that Stoffel is entitled to receive, as compensation for his efforts in obtaining proposals on behalf of certain consideration described below, under the circumstances set forth. NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, the Company and Stoffel agree as follows: 1. As payment for services rendered to the Company in connection with soliciting the interest of third parties in entering into a transaction with the Company, including obtaining and sustaining the interest of certain third parties in making such an acquisition and assisting in the negotiation of the agreement relating thereto, the Company agrees to pay to Stoffel a cash fee of $1,300,000 as provided in paragraph 2 below. 2. The case fee referred to in paragraph 1 above shall be paid to Stoffel within two business days after the consummation of a Transaction that occurs prior to December 31, 2000. For purposes of this agreement, a "Transaction" shall be deemed to have been consummated upon the earliest of the following events to occur: (a) the acquisition of at least a majority of the outstanding common stock of the Company by any person or entity unaffiliated with the Company as of the date hereof, (b) a merger, consolidation or other business combination of the Company with by any person or entity unaffiliated with the Company as of the date hereof or (c) the acquisition by any person or entity unaffiliated with the Company as of the date hereof of not less than a majority of the assets of the Company. 3. As Stoffel has been acting on behalf of the Company, the Company agrees to the indemnification and other obligations set forth in Schedule I attached hereto, which schedule is an integral part hereof. 4. This agreement shall be binding upon and inure to the benefit of the Company and Stoffel and their respective successors and assigns. IN WITNESS WHEREOF, this Agreement is entered into the day and year first above written. BRC HOLDINGS, INC. By: /s/ Jerrold L. Morrison -------------------------------------- Its: President and Chief Operating Officer -------------------------------------- /s/ Paul Stoffel -------------------------------------- Paul Stoffel 2. SCHEDULE I This Schedule I is a part of and is incorporated into that certain agreement (together, the "Agreement"), dated October 18, 1998, by and between BRC Holdings, Inc. (the "Company") and Paul Stoffel ("Stoffel"). The Company agrees to indemnify and hold harmless Stoffel and his affiliates, (each such entity or person an "Indemnified Person") from and against any losses, claims, damages, judgements, assessments, costs and other liabilities (collectively, "Liabilities"), and will reimburse each Indemnified Person for all fees and expenses (including the reasonable fees and expenses of counsel) (collectively, "Expenses") as they are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation, whether or not in connection with pending or threatened litigation or arbitration and whether or not any Indemnified Person is a party (collectively, "Actions"), arising out of or in connection with advice or services heretofore tendered or to be rendered by any Indemnified Person in connection with this Agreement, the transactions contemplated hereby or any Indemnified Person's actions or inactions in connection with any such advice, services or transactions; provided that the Company will not be responsible for any Liabilities or Expenses of any Indemnified Person that are determined by a judgement of a court of competent jurisdiction which is no longer subject to appeal or further review to have resulted solely from such Indemnified Person's gross negligence or willful misconduct in connection with any of the advice, actions, inactions or services referred to above. The Company also agrees to reimburse each Indemnified Person for all Expenses as they are incurred in connection with enforcing such Indemnified Person's rights under this Agreement (including, without limitation, its rights under this Schedule I). Upon receipt by an Indemnified Person of actual notice of an Action against such Indemnified Person with respect to which indemnity may be sought under this Agreement, such Indemnified Person shall promptly notify the Company in writing; provided that failure so to notify the Company shall not relieve the Company from any liability which the Company may have on account of this indemnity or otherwise, except to the extent the Company shall have been materially prejudiced by such failure. The Company shall, if requested by Stoffel, assume the defense of any such Action including the employment of counsel reasonably satisfactory to Stoffel. Any Indemnified Person shall have the right to employ separate counsel in any such Action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person, unless: (i) the Company has failed promptly to assume the defense and employ counsel or (ii) the named parties to any such Action (including any impleaded parties) include such Indemnified Person and the Company, and such Indemnified Person shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the Company; provided that the Company shall not in such event be responsible hereunder for the fees and expenses of more than one firm of separate counsel in connection with any Action in the same jurisdiction, in addition to any local counsel. The Company shall not be liable for any settlement of any Action effected without its written consent. In addition, the Company will not, without prior written consent of Stoffel, settle, compromise or consent to the entry of any judgement in or otherwise seek to terminate any pending or threatened Action in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified person from all Liabilities arising out of such Action. In the event that the foregoing indemnity is unavailable to an Indemnified Person other than in accordance with this Agreement, the Company shall contribute to the Liabilities and Expenses paid or payable by such Indemnified Person in such proportion as is appropriate to reflect (i) the relative benefits to the Company and its shareholders, on the one hand, and to Stoffel, on the other hand, of the matters contemplated by this Agreement or (ii) if the allocation provided by the immediately preceding clause is not permitted by the applicable law, not only such relative benefits but also the relative fault of the Company, on the one hand, and Stoffel, on the other hand, in connection with the matters as to which such Liabilities and Expenses relate, as well as any other relevant equitable considerations; provided that in no event shall the Company contribute less than the amount necessary to ensure that all Indemnified Persons, in the aggregate, are not liable for any Liabilities and Expenses in excess of the amount of fees actually received by Stoffel pursuant to this Agreement. For purposes of this paragraph, the relative benefits to the Company and its shareholders, on the one hand, and to Stoffel, on the other hand, of the matters contemplated by this Agreement shall be deemed to be in the same proportion as (a) the total value paid or contemplated to be paid or received or contemplated to be received by the Company or the Company's shareholders, as the case may be, in the transaction or transactions that are within the scope of this Agreement, whether or not any such transaction is consummated, bears to (b) the fees paid to Stoffel under this Agreement. The Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any Indemnified Person's actions or inactions in connection with any such advice, services or transactions except for Liabilities (and related Expenses) of the Company that are determined by a judgement of a court of competent jurisdiction which is no longer subject to appeal or further review to have resulted solely from such Indemnified Person's gross negligence or willful misconduct in connection with any such advice, actions, inactions or services. The reimbursement, indemnity and contribution obligations of the Company set forth herein shall apply to any modification of this Agreement and shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person's services under or in connection with, this Agreement. -2- EX-8 8 EXHIBIT 8 EXHIBIT 8 BRC HOLDINGS, INC. 1111 W. MOCKINGBIRD LANE, SUITE 1400 DALLAS, TEXAS 75247-5014 October 23, 1998 Dear Fellow Stockholders: We are pleased to inform you that on October 19, 1998, BRC Holdings, Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Affiliated Computer Services, Inc. ("Parent") and ACS Acquisition Corporation, a wholly owned subsidiary of Parent ("Purchaser"), pursuant to which Purchaser has commenced a tender offer (the "Offer") to purchase 8,704,238 shares (the "Shares") of the Company's common stock, par value $0.10 per share (the "Common Stock"), which is approximately 51% of the outstanding shares on a fully diluted basis of Common Stock, for a cash price of $19.00 per Share, net to the seller in cash without interest. The Offer is conditioned upon, among other things, there being validly tendered prior to the expiration of the Offer and not properly withdrawn 8,704,238 Shares. The Offer is also subject to certain other terms and conditions as set forth in the accompanying Offer to Purchase. The Merger Agreement provides that following consummation of the Offer and upon the terms and subject to the conditions in the Merger Agreement and in accordance with Delaware law, Purchaser will be merged (the "Merger") with and into the Company and the shares of the Common Stock that are not acquired in the Offer will be converted into the right to receive $19.00 per share in cash. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER (AS DEFINED IN THE ENCLOSED SCHEDULE 14D-9) ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board of Directors considered the factors described in the accompanying Schedule 14D-9, including the opinion of the Company's financial advisor, Donaldson Lufkin & Jenrette Securities Corporation ("Donaldson Lufkin & Jenrette"), to the effect that the consideration to be received by the stockholders of the Company pursuant to the Offer and the Merger is fair to the stockholders from a financial point of view. A copy of Donaldson Lufkin & Jenrette's written opinion is set forth in full as Annex A to the attached Schedule 14D-9. The accompanying Offer to Purchase sets forth all of the terms of the Offer. Additionally, the enclosed Schedule 14D-9 sets forth additional information regarding the Offer and the Merger relevant to making an informed decision. We urge you to read these materials carefully and in their entirety. Very truly yours, /s/ Paul Stoffel Paul Stoffel CHAIRMAN OF THE BOARD EX-9 9 EXHIBIT 9 EXHIBIT 9 [LOGO] October 18, 1998 Board of Directors BRC Holdings, Inc. 1111 West Mockingbird Suite 1400 Dallas, TX 75247 Dear Sirs: You have requested our opinion as to the fairness from a financial point of view to the holders of the outstanding shares of common stock, par value $0.10 per share (the "Shares"), of BRC Holdings, Inc. (the "Company") of the consideration to be received by such stockholders pursuant to the terms of the Agreement and Plan of Merger, to be dated as of October 19, 1998 (the "Agreement"), by and among Affiliated Computer Services, Inc. ("Buyer"), ACS Acquisition Corporation ("MergerCo"), a wholly-owned subsidiary of Buyer, and the Company. Pursuant to the Agreement, MergerCo will commence a tender offer (the "Tender Offer") for 51% of outstanding Shares at a price of $19.00 in cash per Share (the "Offer Price"). The Tender Offer is to be followed by a merger (the "Merger") of MergerCo with and into the Company in which the Shares not tendered into the Tender Offer would be converted, subject to certain exceptions, into the right to receive the Offer Price. The Tender Offer, together with the Merger, is referred to herein as the "Transaction". In arriving at our opinion, we have reviewed the draft dated October 15, 1998 of the Agreement. We also have reviewed financial and other information that was publicly available or furnished to us by the Company including information provided during discussions with management and directors of the Company. Included in the information provided during discussions with management were certain financial projections of the Company for the period beginning January 1, 1998 and ending December 31, 2003 prepared by the management of the Company. In addition, we have compared certain financial and securities data of the Company with various other companies whose securities are traded in public markets, reviewed the historical stock prices and trading volumes of the Shares of the Company, reviewed prices paid in certain other business combinations and conducted such other financial studies, analyses and investigations as we deemed appropriate for purposes of this opinion. We have been engaged by the Board of Directors of the Company and the Company solely to render an opinion as to the fairness from a financial point of view to the holders of Shares of the consideration to be received by such shareholders pursuant to the Transaction. We have not been engaged to assist in negotiating the financial or other terms of the Transaction or to provide advice as to any particular acquisition proposal. In addition, we were not requested to, nor did we, solicit the interest of any other party in acquiring the Company. In rendering our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by the Company or its representatives, or that was otherwise reviewed by us. With respect to the financial projections supplied to us by management of the Company, we have assumed that they have been reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of the Company as to the future operating and financial performance of the Company. We have not assumed any responsibility for making an independent evaluation of any assets or liabilities or for making any independent verification of any of the information reviewed by us. We have relied as to certain legal matters on advice of counsel to the Company. Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. Our opinion does not address the relative merits of the Transaction and the other business strategies being considered by the Company's Board of Directors, nor does it address the Board's decision to proceed with the Transaction. This opinion is for the use and benefit of the Board of Directors of the Company in connection with its consideration of the Transaction. Our opinion does not constitute a recommendation to any stockholder as to whether such stockholder should tender Shares pursuant to the Tender Offer or how such stockholder should vote on the proposed Transaction. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. DLJ has performed investment banking and other services for the Buyer in the past, including acting as comanager for the Buyer's convertible debt offering in March 1998, and has been paid customary fees for such services. Based upon the foregoing and such other factors as we deem relevant, we are of the opinion that the consideration to be received by the holders of Shares pursuant to the Transaction is fair to such shareholders from a financial point of view. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ Tom C. Davis ----------------------------------- Tom C. Davis MANAGING DIRECTOR EX-10 10 EXHIBIT 10 FOR IMMEDIATE RELEASE Contacts: Paul Stoffel Chairman (214) 750-7778 Thomas Kiraly Chief Financial Officer (214) 905-2370 BRC SIGNS MERGER AGREEMENT WITH ACS Dallas, Texas - October 19, 1998 BRC Holdings, Inc. (BRC)(NASDAQ-BRCP) announced today that it has signed a definitive agreement with Affiliated Computer Services, Inc. (ACS) under which BRC will be acquired by and merged into a subsidiary of ACS. ACS intends to commence a cash tender offer for approximately 51% of the fully-diluted shares of BRC within five business days at a price of $19.00 per share. The merger agreement is subject to certain conditions, including regulatory approvals and approval of the merger by the shareholders of BRC. Upon satisfaction of these conditions, ACS will acquire all of the remaining shares of common stock of BRC at a price of $19.00 per share in cash. Based on BRC's approximately 13.7 million outstanding common shares, the gross transaction value for all shares is approximately $261 million. In addition, BRC currently has cash and readily marketable securities of approximately $100 million. BRC Holdings, Inc., based in Dallas, Texas, is an information technology services firm with 30 years experience in providing consulting, project management, technical support and systems services that enable its clients to achieve their strategic and operational objectives. BRC specializes in information technology outsourcing, consulting, information systems and document management. BRC is ITAA*2000 certified. For more information about BRC, visit the Company's web site at www.brcp.com. ACS is based in Dallas, Texas, and has operations primarily in North America, as well as Central America, South America, Europe and the Middle East. ACS provides a full range of business services including technology outsourcing, business process outsourcing, electronic commerce, professional services and systems integration. The Company's Class A common stock trades on the New York Stock Exchange under the symbol AFA. Visit ACS on the Internet at www.acsinc.com. Statements about the Company's outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside BRC's control, that could cause actual results to differ materially from such statements. While the Company believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors, especially the timing and magnitude of technological advances; market responses to the Company's product and service offerings, pricing pressures, results from litigation, the timely development and acceptance of new products and services, changes in customer preferences, inventory risks due to shifts in market demand and the successful consummation of the transactions contemplated in the merger agreement. Consequently, the actual results realized by the Company could differ materially from the statements made herein. Shareholders of the Company are cautioned not to place an undue reliance on the forward-looking statements made herein. -----END PRIVACY-ENHANCED MESSAGE-----